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FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

Question

A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit	Credit
GH¢’000	GH¢’000
Sales
Inventory	3,150
Cost of sales	35,500
Selling & distribution expenses	5,600
Administration expenses	8,540
Loan Note interest paid	110
Bank interest	85
Investment income
Leasehold building at valuation – 1 Oct 2021	14,000
Plant and equipment – cost/depreciation	13,750
Computer equipment – cost/depreciation	7,200
Motor vehicles – cost/depreciation	1,500
Trade receivables	17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335	107,335

The following additional information is made available:
i. The company paid ordinary dividends of GH¢2.2 per share on 31 January 2022 and GH¢2.6 per share on 30 June 2022. The dividend payments are included in administrative expenses in the trial balance.
ii. Provision is to be made for a full year’s interest on the Loan notes.
iii. non-current assets:
• Depreciation of Property, plant and equipment is to be provided on the following bases:

Plant and equipment – 10% on cost
Computer equipment – 25% on cost
Motor vehicles – 20% on reducing balance.
• No depreciation has yet been charged on any non-current asset for the year ended 30 September 2022.
• ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, the relevant value to be incorporated into the financial statements is GH¢14,100,000.
• The building’s remaining life at the beginning of the current year (1 October 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

You are required to:
Prepare the following financial statements of ANG Ltd. for publication in accordance with International Financial Reporting Standards (IFRS):
a. Statement of profit or loss and other comprehensive income for the year ended 30 September 2022 and.
b. Statement of financial position as of 30 September 2022.
c. Show clearly all relevant workings.

B
I. What is the objective of general-purpose financial reporting?
II. The IASB’s Conceptual Framework for Financial Reporting states that “If financial information is to be useful, it must be relevant and faithfully represent what it purports to represent.” Explain the terms Relevance and Faithfully Representation.

C
The accounting treatment of intangible assets is prescribed by IAS 38 Intangible Assets. You are required to:
i. Define intangible asset under IAS 38 Intangible Assets.
ii. Explain the recognition criteria for intangible assets.
iii. State 5 disclosure requirements of Intangible Assets under IAS 38.

Answer

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Tags: Comprehensive Income, Conceptual Framework, Depreciation, Disclosure, Faithful Representation, Financial Position, FRS, IAS 38, Intangible Assets, Profit or Loss, Recognition, Relevance, Revaluation Surplus
Level: Level 3

Topic: PLANNING AND ANALYSIS
Series: APR 2023

FR – Mar 2025 – L2 – Q1 – Consolidated Financial Statements

Prepare consolidated financial statements for Aba LTD, including adjustments for acquisition, intra-group sales, government grants, and impairment.

Question

Aba LTD (Aba), a technology company, acquired 60% of the share capital of Boafo LTD (Boafo) on 1 January 2024. There are two elements to the purchase consideration – a share exchange transaction of three shares in Aba for every five shares acquired in Boafo, and a cash consideration of GH¢20.4 million on the date of acquisition. The share price of Aba at the acquisition date was GH¢1.2 per share. Only the cash consideration of GH¢20.4 million has been recorded in the books by Aba. The market price of Boafo’s shares just before the acquisition was GH¢1.015.
The summarised draft Financial Statements of both companies as at 31 December, 2024 are as follows:

Statement of Profit or Loss for the year ended 31 December 2024

	Aba (GH¢’000)	Boafo (GH¢’000)
Sales revenue	200,500	50,500
Cost of sales	(110,000)	(24,000)
Gross profit	90,500	26,500
Admin expenses	(50,300)	(15,700)
Finance cost	(1,200)	–
Profit before tax	39,000	10,800
Income tax expense	(5,450)	(2,200)
Profit for the year	33,550	8,600

Statement of Financial Position as at 31 December 2024

	Aba (GH¢’000)	Boafo (GH¢’000)
Non-current assets:
Property, plant & equipment	40,500	35,000
Investment in Boafo	20,400	–
	60,900	35,000
Current assets
Inventories	10,500	12,000
Trade and other receivables	20,000	2,500
Cash and cash equivalents	12,500	550
	43,000	15,050
	103,900	50,050
Equity
Share capital (GH¢1 per ordinary shares)	50,000	35,000
Retained earnings as at 31 December 2023	10,000	5,000
Retained earnings for year ended 31 December 2024	33,550	8,600
	93,550	48,600
Non-current liabilities
Long-term borrowings	5,600	800
Current liabilities
Trade and other payables	4,750	650
	10,350	1,450
	103,900	50,050

The following information is relevant:
i) The fair values of Boafo’s net assets were equal to their carrying amounts at the date of acquisition with the exception of a plant which was valued at GH¢4 million below its carrying amount. The remaining useful life for this plant is four (4) years and this period has not changed as a result of the acquisition. Depreciation of plant is on a straight-line basis and charged to cost of sales. The fair value of the plant has not been incorporated in the financial statements.
ii) In the post-acquisition period, Aba sold goods to Boafo at a total value of GH¢4.6 million. These goods cost Aba GH¢3 million. During the year, Boafo had sold GH¢2.5 million out of the GH¢4.6 million goods from Aba for GH¢3.2 million.
iii) On the first of July 2024, Aba received a grant from the Government in the form of a building. The value of this building was GH¢5 million with a useful life of 20 years. The Accountant of Aba who is not a Chartered Accountant credited the value of the building to revenue. It has been advised that the recognition of this transaction should be done in line with the provisions of IAS 20: Accounting for Government Grants and Disclosure of Government Assistance. It is the group’s policy to recognise grants relating to assets as deferred income.
iv) Aba’s policy is to value non-controlling interest at fair value at the date of acquisition. For this purpose, Boafo’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.
v) Goodwill was reviewed for impairment at the end of the reporting period and had suffered an impairment loss equivalent to 10% of goodwill at acquisition which is to be treated as an operating expense.

Required:
Prepare for Aba LTD a Consolidated Statement of Profit or Loss for the year ended 31 December 2024 and a Consolidated Statement of Financial Position as at 31 December 2024.

Answer

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Tags: consolidated financial statements, Financial Position, Goodwill, IAS 20, IFRS 10, IFRS 3, Impairment, Intra-group Transactions, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Group Financial Statements and Consolidation
Series: MAR 2025

FR – Nov 2024 – L2 – Q4b – Financial Performance Assessment of Acquisition Targets

Assessment of financial performance and position of Suah LTD and Nagbe LTD to assist Dukuly LTD in an acquisition decision.

Question

Dukuly LTD, a public entity, has been expanding through acquisitions. It is assessing two potential acquisition targets, Suah LTD and Nagbe LTD, both operating in the same industry.

The financial statements of Suah LTD and Nagbe LTD for the year ended 30 September 2024 have been provided, along with a set of financial ratios calculated for Suah LTD.

Required:
Using the calculated ratios for Nagbe LTD from Question 4a, assess the relative financial performance and financial position of Suah LTD and Nagbe LTD, to assist the directors of Dukuly LTD in making an acquisition decision.

Answer

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Tags: Financial Position, Gearing, Investment Decision, Liquidity, Performance Evaluation, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

FA – Nov 2024 – L1 – Q1 – Partnership Financial Statements

Prepare the profit or loss and appropriation account and financial position statement for a partnership at retirement and admission of partners.

Question

Atsu, Baba, and Chawe are in partnership, providing management services, sharing profits in the ratio 5:3:2 after charging annual salaries of GH¢18,000 each. Current accounts are not maintained. On 30 June 2024, Atsu retired.

Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.

The previous partnership trial balance as of 30 June 2024 was as follows:

Description	GH¢	GH¢
Capital accounts – Atsu		12,519
Capital accounts – Baba		65,844
Capital accounts – Chawe		33,618
Trade receivables	138,615
Inventories at 1 July 2023	6,000
Operating expenses	419,166
Investment	300
Bank overdraft		33,510
Trade payables		52,218
Revenue		565,296
Total	663,543	663,543

Additional Information:

Inventory remains at GH¢6,000.
Full provision is required for an irrecoverable debt of GH¢3,450.
Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
Dua introduced cash of GH¢22,500 to the partnership.

Required:
i) Prepare the statement of profit or loss and appropriation account of the previous partnership for the year ended 30 June 2024 and a statement of financial position at that date. (9 marks)
ii) Prepare the statement of financial position for the current partnership as of 1 July 2024. (6 marks)

Answer

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Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: Nov 2024

AAA – Nov 2012 – L3 – AII – Q1 – Overview of Advanced Audit and Assurance.

Defines assets in the context of financial position.

Question

In the financial position of a company, ……………….. are resources arising from past events and for which future economic benefits are derivable.

Answer

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Tags: Accounting, Assets, Economic Benefits, Financial Position, Financial Reporting
Level: Level 3

Topic: Overview of Advanced Audit and Assurance
Series: NOV 2012

CR – Nov 2016 – L3 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Bata Plc and subsidiaries including goodwill, NCI, and intra-group adjustments.

Question

Bata Plc, which operates in the manufacturing sector, has been surviving the challenges operating in the Nigerian economic environment. The draft Statements of Financial Position of Bata Plc and its subsidiaries as at October 31, 2016 are as follows:

The following information is relevant to the preparation of the group financial statements:

Acquisition Dates: Bata Plc acquired 60% of the share capital of Jewe Plc on November 1, 2012, and 10% of Gaba Plc on November 1, 2013, at costs of N852 million and N258 million, respectively. Jewe Plc acquired 70% of Gaba’s share capital on November 1, 2013.
Retained Earnings at Acquisition:

Fair Values at Acquisition: The fair values of Jewe and Gaba’s net assets were N930 million and N660 million, respectively, including non-depreciable land. The fair value of non-controlling interest (NCI) was N390 million for Jewe and N330 million for Gaba. Bata Plc adopts the full goodwill method under IFRS 3.
Impairment: Impairment testing shows Jewe suffered a loss of N60 million, but Gaba had no impairment.
Intra-group Sales: Bata sold inventory to Jewe and Gaba for N480 million and N360 million, respectively, invoicing with a 25% markup on cost. At year-end, half of Jewe’s inventory remains unsold, while Gaba sold its entire stock to third parties.
Deep Discount Bond: Bata purchased a bond for N500 million with a redemption value of N740.75 million in three years. The bond’s effective interest rate is estimated at 14%. The Accountant has not yet recorded amortized cost for this financial asset.

Required: Prepare a Consolidated Statement of Financial Position for Bata Plc and its subsidiaries as at October 31, 2016.

Answer

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Tags: Consolidation, Financial Assets, Financial Position, Impairment, Intra-Group Sales, Inventory Adjustment
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)

FM – Nov 2021 – L3 – Q7 – Financing Decisions and Capital Markets

Analyze the effects of a 1-for-5 rights issue for James Obasi plc, calculate theoretical ex-rights price, and assess investor options and impacts.

Question

James Obasi plc, a medium-sized drone manufacturing firm, is considering a 1-for-5 rights issue at a 15% discount to the current market price of N4.00 per share. Expected issue costs are N2 million, payable from the funds raised. The proceeds from the rights issue will be used to redeem some of the company’s existing bonds at par.

Financial Information:

Statement of Financial Position (N’000):

Required:

a. Ignoring issue costs and any use of the funds raised by the rights issue, calculate: i. The theoretical ex-rights price per share. ii. The value of rights per existing share. (4 Marks)

b. Identify the alternative actions available to an owner of 1,500 shares in James Obasi plc concerning the rights issue and determine the effect of each action on the investor’s wealth. (6 Marks)

c. Calculate the current earnings per share and the revised earnings per share if the rights issue funds are used to redeem some of the existing bonds.
(5 Marks)

Answer

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Tags: Corporate Tax, Debt Redemption, Debt-equity ratio, Ex-Rights Price, Financial Position, Interest Cover, Investor Options, Rights Issue, Shareholder Wealth
Level: Level 3

Topic: Financing Decisions and Capital Markets

CR – Nov 2021 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial position of Makoko Group for the year ended Dec 31, 2021, and discuss accounting implications of significant influence.

Question

Makoko Intercontinental Holdings Limited is a global merchant of cash crops. A policy of strategic acquisitions over the years has placed the company in a position to source for export products competitively. The lockdown arising from the recent pandemic posed a significant challenge for the export of their products throughout the year 2020. At a board meeting to review the performance of the company for that year and discuss the impact of the pandemic, the Managing Director noted the significant drop in the general performance indices. In order to get a greater market presence and higher demand locally, the board decided to acquire the following investments on January 1, 2021:

60% of the equity share of Ojodu Limited;
50% of 10% loan notes of Ojodu Ltd at par;
40% stake in the ordinary shares of Egbeda Confectioneries Limited.

In the opinion of the board, both Ojodu Limited and Egbeda Confectioneries Limited are the biggest local customers of Makoko Intercontinental Holdings Limited and a control through shareholding would give the investing company greater stake in the operational decisions of the investee companies. Importantly, it would also boost revenue by allowing unrestricted access to local markets. It is believed that this will forestall any adverse impact of further lockdowns that may hinder export sales in the future.

The draft financial statements of the companies for the year are as follows:

Statements of financial position as at December 31, 2021

Additional Information:

Makoko Limited paid N90 million for the acquisition of Ojodu Limited when the retained earnings of Ojodu Limited were N13 million.
The fair value of Ojodu’s freehold property was N6.5 million higher than the carrying amount as at the date of acquisition. This valuation has not been reflected in the books of Ojodu Limited.
Makoko Limited paid N41 million for the shareholding in Egbeda Limited when the retained earnings of Egbeda Limited were N12 million.
An impairment test as at December 31, 2021 showed that goodwill was impaired by N3.5 million and the investment in Egbeda Limited was impaired by N0.8 million.
During the year, Makoko Limited sold products to Egbeda Limited at a price of N8 million. These goods had cost Makoko Limited N5 million. Half of the goods were still in the inventory of Egbeda Limited as at December 31, 2021.
The companies issued share capital has not changed since the date of acquisition.
No dividends were paid during the year.
Non-controlling interests in subsidiaries are to be measured at the appropriate proportion of the subsidiary’s identifiable net assets.

Required: a. Prepare the consolidated statement of financial position for the Makoko Group for the year ended December 31, 2021. (20 Marks)

b. The Directors of Makoko Intercontinental Holdings Limited are concerned about getting significant influence, if not absolute control, of all entities they intend to buy into. The five-year strategic plan of the company (2020 – 2024) focuses on having control of the cash crops segment of the agribusiness sector of the economy. This is in order to make them ready to roll out the next developmental phase of the business, which is to migrate from exporting raw products to finished products for industrial and household use.

Towards this goal, the board requires the Group Accountant to make a presentation on the accounting implications of gaining significant influence in another entity.

Required: Discuss the issues involved in the requirements of the Board as specified above. (5 Marks)

c. A friend to the Chief Accountant of Makoko Intercontinental Holdings Limited, who is a consultant to Ojodu Limited and Egbeda Confectionaries Limited, is requesting for information on the new acquisitions from his friend, the Chief Accountant.

Required: Identify the ethical issues involved in the above scenarios and their implications. (5 Marks)

Answer

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Tags: Associate, Consolidation, Financial Position, Goodwill, Impairment, Non-Controlling Interest, Subsidiary
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)

CR – Nov 2020 – L3 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated profit or loss, financial position, cash flow benefits explanation, and share disposal accounting for a group structure.

Question

Statements of financial position as at December 31, 2019

Statement of profit or loss for the year ended December 31, 2019

Statement of changes in equity (extract) for the year ended December 31,
2019

Additional Information:

Haba owns 80% of Suka‘s shares, purchased in 2016 for N20.5 million cash, when Suka’s retained earnings balance was N7 million.
In 2014, Haba purchased 60% of Zara‘s shares by issuing shares with a nominal value of ₦6.5 million at a premium of N6.5 million. At acquisition, Zara‘s retained earnings were N3 million, and the fair value of net assets was N24 million. Any undervaluation was attributed to land still held as of December 31, 2019.
Inventory at December 31, 2019, includes goods Zara and Suka purchased from Haba valued at ₦5.2 million and N3.9 million, respectively. Haba aims for a 30% profit margin on cost. Total sales from Haba to Zara and Suka were N8 million and N6 million, respectively.
Haba and Suka each proposed dividends before year-end of N2 million and N2.5 million, respectively. These have not been accounted for yet.
Haba conducted annual impairment tests on goodwill per IFRS 3 and IAS 36. The estimated recoverable amount of goodwill was N5 million in 2016 and N4.5 million in 2019.

Requirements:

a. Prepare the consolidated statement of profit or loss for the year ended December 31, 2019.
(10 Marks)

b. Prepare the consolidated statement of financial position as at December 31, 2019.
(10 Marks)

c. Explain the benefits to external users of including a statement of group cash flows in the annual report.
(10 Marks)

d. At December 31, 2019, Hard plc owned 90% of Spark Limited’s shares. The net assets of Spark in Hard Group’s consolidated financial statements amounted to N800 million, with no asset revaluation.

On January 1, 2020, Hard sold 80% of its Spark equity for N960 million cash, and the fair value of Hard’s remaining Spark shares is N100 million.

Required: Explain how the Spark share disposal should be accounted for in Hard Group’s consolidated financial statements.
(10 Marks)

Answer

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Tags: Cash Flow, Consolidation, Financial Position, Group Statements, Profit or Loss, Share Disposa
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)

CR – May 2024 – L3 – SB – Q2 -Consolidated Financial Statements (IFRS 10)

Memo advising on acquisition decision based on financial analysis of Betta and Gamma Ltd.

Question

Alpha PLC is an entity which has grown in recent years by acquiring established businesses. Alpha PLC is contemplating acquiring Betta Limited and Gamma Limited, both operating in the same industry as Alpha PLC. The management of Alpha PLC has indicated a total acquisition price of N12 million for each company. The following financial statements provide insight into the performance and financial position of both Betta Limited and Gamma Limited as at September 30, 2020:

Statement of Profit or Loss (for the year ended September 30, 2020):

	Betta Ltd (N’000)	Gamma Ltd (N’000)
Revenue	25,000	40,000
Cost of sales	(19,000)	(32,800)
Gross profit	6,000	7,200
Distribution costs	(800)	(1,400)
Administrative expenses	(450)	(900)
Finance costs	(250)	(900)
Profit before tax	4,500	4,000
Income tax expense	(900)	(1,000)
Profit for the year	3,600	3,000

Statement of Financial Position (as at September 30, 2020):

	Betta Ltd (N’000)	Gamma Ltd (N’000)
Non-current assets
Property, plant and equipment
– Property	–	3,000
– Owned plant and equipment	4,800	2,000
– Leased plant and equipment	–	5,300
Total non-current assets	4,800	10,300
Current assets
Cash at bank and in hand	1,600	200
Trade receivables	1,600	5,100
Inventories	1,600	3,400
Total current assets	4,800	8,700
Total assets	9,600	19,000
Equity and liabilities
Ordinary shares (N1.00 each)	1,000	2,000
Revaluation surplus on property	–	900
Retained earnings	1,600	2,700
Total equity	2,600	5,600
Non-current liabilities
Finance lease obligation	–	4,200
5% loan notes (Dec 2026)	5,000	–
10% loan notes (Dec 2026)	–	5,000
Total non-current liabilities	5,000	9,200
Current liabilities
Trade payables	1,250	2,100
Finance lease obligation	–	1,000
Tax payable	750	1,100
Total current liabilities	2,000	4,200
Total equity and liabilities	9,600	19,000

Additional Ratios Calculated:
- Gross profit margin: Betta 24.0%, Gamma 18.0%
- Profit margin (before interest and tax): Betta 19.0%, Gamma 12.3%
- Return on capital employed (ROCE): Betta 62.5%, Gamma 31.0%
- Current ratio: Betta 2.4:1, Gamma 2.1:1
- Acid test ratio: Betta 1.6:1, Gamma 1.26:1
- Net assets turnover: Betta 3.3 times, Gamma 2.5 times
- Gearing: Betta 65.8%, Gamma 64.6%

Required:

a. Write a memo to the Director of Alpha PLC advising him on how to make the investment decision considering the performance and financial position of Betta Limited and Gamma Limited for the year ended September 30, 2020. (14 Marks)

b. What other qualitative factors should the management of Alpha PLC take into consideration assuming Gamma Limited is a foreign subsidiary? (6 Marks)

Answer

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Tags: Business Acquisition, Corporate Reporting, Financial Position, Investment Decision, Ratio Analysis
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2024

FRPA – APRIL 2023 – L3 – Q1 – Financial Statements Preparation, Conceptual Framework, and Intangible Assets

Prepare the statement of profit or loss and other comprehensive income and the statement of financial position for ANG Ltd based on the given trial balance and additional information; explain the objective of general-purpose financial reporting and the terms relevance and faithful representation; define intangible assets, explain recognition criteria, and state disclosure requirements under IAS 38.

Question

A
The following is the trial balance of ANG Ltd, a trading company, as of 30 September 2022:

Debit	Credit
GH¢’000	GH¢’000
Sales
Inventory	3,150
Cost of sales	35,500
Selling & distribution expenses	5,600
Administration expenses	8,540
Loan Note interest paid	110
Bank interest	85
Investment income
Leasehold building at valuation – 1 Oct 2021	14,000
Plant and equipment – cost/depreciation	13,750
Computer equipment – cost/depreciation	7,200
Motor vehicles – cost/depreciation	1,500
Trade receivables	17,900
Bank
Trade payables
500,000 Ordinary shares
8% Loan notes (2019 – 2023)
Revaluation surplus
General reserve
Retained earnings – 1 Oct 2021
107,335	107,335

Plant and equipment – 10% on cost
Computer equipment – 25% on cost
Motor vehicles – 20% on reducing balance.
• No depreciation has yet been charged on any non-current asset for the year ended 30 September 2022.
• ANG Ltd revalues its buildings at the end of each accounting year. On 30 September 2022, the relevant value to be incorporated into the financial statements is GH¢14,100,000.
• The building’s remaining life at the beginning of the current year (1 October 2021) was 25 years. ANG Ltd does not make an annual transfer from the revaluation reserve to retained earnings in respect of the realization of the revaluation surplus. Ignore deferred tax on the revaluation surplus.
iv. Estimated corporate income tax payable on the profit for the year is GH¢3,500,000.

Answer

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Tags: Comprehensive Income, Conceptual Framework, Depreciation, Disclosure, Faithful Representation, Financial Position, FRS, IAS 38, Intangible Assets, Profit or Loss, Recognition, Relevance, Revaluation Surplus
Level: Level 3

Topic: PLANNING AND ANALYSIS
Series: APR 2023

FR – Mar 2025 – L2 – Q1 – Consolidated Financial Statements

Prepare consolidated financial statements for Aba LTD, including adjustments for acquisition, intra-group sales, government grants, and impairment.

Question

Statement of Profit or Loss for the year ended 31 December 2024

	Aba (GH¢’000)	Boafo (GH¢’000)
Sales revenue	200,500	50,500
Cost of sales	(110,000)	(24,000)
Gross profit	90,500	26,500
Admin expenses	(50,300)	(15,700)
Finance cost	(1,200)	–
Profit before tax	39,000	10,800
Income tax expense	(5,450)	(2,200)
Profit for the year	33,550	8,600

Statement of Financial Position as at 31 December 2024

	Aba (GH¢’000)	Boafo (GH¢’000)
Non-current assets:
Property, plant & equipment	40,500	35,000
Investment in Boafo	20,400	–
	60,900	35,000
Current assets
Inventories	10,500	12,000
Trade and other receivables	20,000	2,500
Cash and cash equivalents	12,500	550
	43,000	15,050
	103,900	50,050
Equity
Share capital (GH¢1 per ordinary shares)	50,000	35,000
Retained earnings as at 31 December 2023	10,000	5,000
Retained earnings for year ended 31 December 2024	33,550	8,600
	93,550	48,600
Non-current liabilities
Long-term borrowings	5,600	800
Current liabilities
Trade and other payables	4,750	650
	10,350	1,450
	103,900	50,050

Required:
Prepare for Aba LTD a Consolidated Statement of Profit or Loss for the year ended 31 December 2024 and a Consolidated Statement of Financial Position as at 31 December 2024.

Answer

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Tags: consolidated financial statements, Financial Position, Goodwill, IAS 20, IFRS 10, IFRS 3, Impairment, Intra-group Transactions, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Group Financial Statements and Consolidation
Series: MAR 2025

FR – Nov 2024 – L2 – Q4b – Financial Performance Assessment of Acquisition Targets

Assessment of financial performance and position of Suah LTD and Nagbe LTD to assist Dukuly LTD in an acquisition decision.

Question

Dukuly LTD, a public entity, has been expanding through acquisitions. It is assessing two potential acquisition targets, Suah LTD and Nagbe LTD, both operating in the same industry.

The financial statements of Suah LTD and Nagbe LTD for the year ended 30 September 2024 have been provided, along with a set of financial ratios calculated for Suah LTD.

Answer

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Tags: Financial Position, Gearing, Investment Decision, Liquidity, Performance Evaluation, Profitability, Ratio Analysis
Level: Level 2

Topic: Financial Statement Analysis
Series: Nov 2024

FA – Nov 2024 – L1 – Q1 – Partnership Financial Statements

Prepare the profit or loss and appropriation account and financial position statement for a partnership at retirement and admission of partners.

Question

Dua was admitted on 1 July 2024 to the partnership and is entitled to 30% of the profits of the current partnership, with the balance being shared equally between Baba and Chawe.

The previous partnership trial balance as of 30 June 2024 was as follows:

Description	GH¢	GH¢
Capital accounts – Atsu		12,519
Capital accounts – Baba		65,844
Capital accounts – Chawe		33,618
Trade receivables	138,615
Inventories at 1 July 2023	6,000
Operating expenses	419,166
Investment	300
Bank overdraft		33,510
Trade payables		52,218
Revenue		565,296
Total	663,543	663,543

Additional Information:

Inventory remains at GH¢6,000.
Full provision is required for an irrecoverable debt of GH¢3,450.
Adjustments agreed by partners:
- The investment is to be included at GH¢4,500.
- Goodwill, which remains in the books, is valued at GH¢72,000.
On 1 July 2024, GH¢30,000 due to Atsu was transferred to Dua. The balance due to Atsu is to be repaid over three years, commencing on 1 July 2024.
Dua introduced cash of GH¢22,500 to the partnership.

Answer

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Tags: Appropriation, Capital Accounts, Financial Position, Goodwill, Partnership, Profit or Loss
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: Nov 2024

AAA – Nov 2012 – L3 – AII – Q1 – Overview of Advanced Audit and Assurance.

Defines assets in the context of financial position.

Question

In the financial position of a company, ……………….. are resources arising from past events and for which future economic benefits are derivable.

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CR – Nov 2016 – L3 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Bata Plc and subsidiaries including goodwill, NCI, and intra-group adjustments.

Question

The following information is relevant to the preparation of the group financial statements:

Acquisition Dates: Bata Plc acquired 60% of the share capital of Jewe Plc on November 1, 2012, and 10% of Gaba Plc on November 1, 2013, at costs of N852 million and N258 million, respectively. Jewe Plc acquired 70% of Gaba’s share capital on November 1, 2013.
Retained Earnings at Acquisition:

Fair Values at Acquisition: The fair values of Jewe and Gaba’s net assets were N930 million and N660 million, respectively, including non-depreciable land. The fair value of non-controlling interest (NCI) was N390 million for Jewe and N330 million for Gaba. Bata Plc adopts the full goodwill method under IFRS 3.
Impairment: Impairment testing shows Jewe suffered a loss of N60 million, but Gaba had no impairment.
Intra-group Sales: Bata sold inventory to Jewe and Gaba for N480 million and N360 million, respectively, invoicing with a 25% markup on cost. At year-end, half of Jewe’s inventory remains unsold, while Gaba sold its entire stock to third parties.
Deep Discount Bond: Bata purchased a bond for N500 million with a redemption value of N740.75 million in three years. The bond’s effective interest rate is estimated at 14%. The Accountant has not yet recorded amortized cost for this financial asset.

Required: Prepare a Consolidated Statement of Financial Position for Bata Plc and its subsidiaries as at October 31, 2016.

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Tags: Consolidation, Financial Assets, Financial Position, Impairment, Intra-Group Sales, Inventory Adjustment
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