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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

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

CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

Question

Dangogo Plc. has adopted IFRS in the preparation and presentation of its financial statements in line with Financial Reporting Council of Nigeria requirements. During deliberations on their financial statements for the year ended 31 March, 2019 the directors of Dangogo Plc. found the distinction between profit or loss and other comprehensive income confusing. This is the case with many other preparers or users of financial statements in Nigeria who seem to be unclear about the relationship between profit or loss and other comprehensive income (OCI). They blame the conceptual framework for Financial Reporting and IAS 1 regarding the confusing nature of re classification. The emergence of integrated reporting holds promises for better reporting, but preparers are equally uncertain about whether the International Integrated Reporting Councils (IIRC) or Integrated Reporting (IR) Framework constitutes suitable criteria for report preparation.

a. Discuss the nature of a re-classification adjustment and the arguments for and against allowing re-classification of items to profit or loss. (6 Marks)

bi. Discuss the objectives of integrated reporting and key components (content elements) of integrated reports. (6 Marks)

ii. Comment on any concerns which could limit the Framework’s suitability for assessing the performance and prospects of an entity. (3 Marks)

Answer

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Tags: Conceptual Framework, Financial Statements, Integrated Reporting, OCI, Profit or Loss, Reclassification
Level: Level 3

Topic: Presentation of Financial Statements (IAS 1)

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)

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Question

Wizkid Bottling Company Plc specializes in the production of alcoholic wine known as Blue Bull and a soft drink called “Wiz-Cola,” operating two divisions: Blue Bull and Wiz-Cola. Due to high labor costs and raw material shortages for wine production, the Blue Bull division has incurred significant operating losses. Management decided to close down the Blue Bull division and drew up a plan to discontinue its operations.

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

	2019		2018
	Blue Bull	Wiz-Cola	Blue Bull	Wiz-Cola
Revenue	235,000	1,570,000	250,000	1,250,000
Cost of sales	175,000	505,000	200,000	450,000
Admin. expenses	35,000	311,000	25,000	255,000
Distribution costs	20,000	186,500	10,000	157,500
Other operating	15,000	124,500	10,000	102,500
expenditure
Taxation expense	(3,000)	130,500	1,500	85,000

Additional Information:

Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

i. Draft the statement of profit or loss for Wizkid Bottling Company Plc for the years ended March 31, 2019, and 2018, in compliance with IFRS 5, showing continuing and discontinuing operations.
(10 Marks)

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Answer

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Tags: Additional Disclosures, Discontinued Operations, IFRS 5, Profit or Loss
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: MAY 2021

FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

Question

Olu Nigeria PLC has a subsidiary, Oba Limited, which it acquired on January 1, 2022. The financial statements of the companies are detailed below:

Statements of Profit or Loss for the year ended September 30, 2022

Additional Information:

Olu PLC acquired its 70% interest in Oba Limited through a share exchange of three shares in Olu PLC for every five shares in Oba Limited. At the acquisition date, the shares of Olu PLC were sold at ₦8.10 each on the Nigerian Exchange (NGX). The parent company has not recorded this share issue in its books.
At the acquisition date, the fair value of Oba Limited’s assets equaled their carrying amounts except for an item of plant, which had a fair value of N30,000,000 above its carrying amount. This fair value increase has not been adjusted in Oba Limited’s books. The plant’s remaining life at acquisition was five years.
During the year, Oba Limited transferred goods worth N40,000,000 to Olu PLC. These goods were invoiced at cost plus 25%, and only a quarter of them were sold by Olu PLC at year-end.
Included in the other income was N6,550,000 received from Oba Limited as interest paid on a loan granted by Olu PLC. The loan was fully repaid before September 30, 2022.
An impairment test revealed a goodwill impairment of N28,000,000 at the acquisition date.
It is the group’s policy to value non-controlling interests at fair value. The prevailing market price per ordinary share of Oba Limited at January 1, 2022, was ₦5.05.
The gain on the revaluation of property arose from an independent valuation of the group’s property in September 2022.
Administrative expenses of Oba Limited included N10,000,000 paid as management fees to Olu PLC, and the income has been duly recorded in Olu PLC’s books.
Income and expenses accrue evenly over the period.

Required:

a. Prepare the consolidated statement of profit or loss and other comprehensive income for Olu Group for the year ended September 30, 2022. (12 Marks)

b. Calculate the goodwill on acquisition and the non-controlling interest at the reporting date. (4 Marks)

c. IFRS 10 – Consolidated Financial Statements states that a parent must present consolidated financial statements for its investments in subsidiaries.

Required:
State FOUR exceptions to this pronouncement. (4 Marks)

Answer

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Tags: consolidated financial statements, Elimination of Intragroup Transactions, Fair Value, Goodwill, IFRS 10, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2023

FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

Question

The Chief Accountant of Uchena Nigeria plc has just forwarded the trial balance of the company to you for review before the preparation of draft financial statements for the year ended December 31, 2018.

The trial balance is as follows:

Description	Debit (N’m)	Credit (N’m)
Ordinary share capital		43,200
Revenue		125,280
Staff cost	18,720
Leasehold building	21,600
Patent rights	4,320
Work-in-progress (Jan 1, 2018)	9,000
Accum. Depreciation on building (Jan 1, 2018)		4,320
Inventories of finished goods (Jan 1, 2018)	11,160
Consultancy fee	3,168
Directors’ salaries	25,920
Computer at cost (Hardware)	3,600
Accum. Depreciation on computer (Jan 1, 2018)		1,440
Retained earnings (Jan 1, 2018)		8,712
Dividend paid	9,000
Cash and bank	31,680
Trade receivables	30,240
Trade payables		6,624
Sundry expenses	21,168
Totals	189,576	189,576

Additional information:

On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
The patent rights relate to a computer software with a 3-year life span.
An allowance for bad debts of 5% is to be created.
Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
Prepare a statement of financial position as at December 31, 2018. (6 Marks)

Answer

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Tags: Financial Statements, IAS 1, Profit or Loss, Revaluation, Statement of Changes in Equity, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2019

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Question

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item	N’000	N’000
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables		8,625
Inventories – finished goods – 31/12/18	276,750
Work-in-progress – 31/12/18	49,125
Inventories – raw materials at cost – 31/12/18	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings – 31/12/18		425,250
Patents and trademarks	323,250
Motor vehicle at cost	112,500
Freehold property at cost	375,000
Leasehold property at cost	112,500
Plant and equipment at cost	225,000
Furniture and fittings at cost	75,000
Amortisation of leasehold property – 31/12/18		22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment		102,750
– Furniture and fittings		23,625
– Motor vehicles		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
	4,183,500	4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

Raw materials: N168,900
Finished goods: N413,025
Work-in-progress: N56,700

(iii) Legal and professional expenses include solicitor’s fees for purchase of new freehold land during the year of N7,500.
(iv) Provision is to be made for full year’s interest on the loan notes.
(v) The leasehold land and buildings are held on a 50-year lease, with 40 years unexpired life left as at the end of December 31, 2018.
(vi) Depreciation for the year is to be charged as follows:

Plant and equipment 8% on cost – charged to production
Furniture and fittings 10% on cost – charged to administration
Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

Answer

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Tags: Depreciation, Expenses, IAS 1, OCI, Profit or Loss, Revenue
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2020

FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

This question involves calculating the profit or loss on the disposal of a non-current asset.

Question

A non-current asset with an original cost of N500,000 and accumulated depreciation of N400,000 was disposed of for N80,000. Calculate the profit or loss on disposal.

Answer

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Tags: Asset Disposal, Profit or Loss
Level: Level 1

Topic: Depreciation Methods and Accounting for Disposals
Series: MAY 2013

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

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

CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

Question

a. Discuss the nature of a re-classification adjustment and the arguments for and against allowing re-classification of items to profit or loss. (6 Marks)

bi. Discuss the objectives of integrated reporting and key components (content elements) of integrated reports. (6 Marks)

ii. Comment on any concerns which could limit the Framework’s suitability for assessing the performance and prospects of an entity. (3 Marks)

Answer

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Tags: Conceptual Framework, Financial Statements, Integrated Reporting, OCI, Profit or Loss, Reclassification
Level: Level 3

Topic: Presentation of Financial Statements (IAS 1)

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)

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)

FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

Question

On February 1, 2019, the Board of Directors of Wizkid Bottling Company Plc approved and immediately announced the formal plan.

The following figures are available for the current and prior year ending March 31:

	2019		2018
	Blue Bull	Wiz-Cola	Blue Bull	Wiz-Cola
Revenue	235,000	1,570,000	250,000	1,250,000
Cost of sales	175,000	505,000	200,000	450,000
Admin. expenses	35,000	311,000	25,000	255,000
Distribution costs	20,000	186,500	10,000	157,500
Other operating	15,000	124,500	10,000	102,500
expenditure
Taxation expense	(3,000)	130,500	1,500	85,000

Additional Information:

Severance pay of N42.5 million was incurred between February 1, 2019, and March 31, 2019.
An evaluation of the recoverability of assets in the Blue Bull Division in terms of IAS 36 led to recognizing an impairment loss of N9.5 million, which is included in other operating expenses above.

Required:

ii. List additional disclosures required by IFRS 5 for the discontinued operations in the financial statements for the year ended March 31, 2019.
(3 Marks)

Answer

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Tags: Additional Disclosures, Discontinued Operations, IFRS 5, Profit or Loss
Level: Level 2

Topic: Impairment of Assets (IAS 36)
Series: MAY 2021

FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

Question

Olu Nigeria PLC has a subsidiary, Oba Limited, which it acquired on January 1, 2022. The financial statements of the companies are detailed below:

Statements of Profit or Loss for the year ended September 30, 2022

Additional Information:

Olu PLC acquired its 70% interest in Oba Limited through a share exchange of three shares in Olu PLC for every five shares in Oba Limited. At the acquisition date, the shares of Olu PLC were sold at ₦8.10 each on the Nigerian Exchange (NGX). The parent company has not recorded this share issue in its books.
At the acquisition date, the fair value of Oba Limited’s assets equaled their carrying amounts except for an item of plant, which had a fair value of N30,000,000 above its carrying amount. This fair value increase has not been adjusted in Oba Limited’s books. The plant’s remaining life at acquisition was five years.
During the year, Oba Limited transferred goods worth N40,000,000 to Olu PLC. These goods were invoiced at cost plus 25%, and only a quarter of them were sold by Olu PLC at year-end.
Included in the other income was N6,550,000 received from Oba Limited as interest paid on a loan granted by Olu PLC. The loan was fully repaid before September 30, 2022.
An impairment test revealed a goodwill impairment of N28,000,000 at the acquisition date.
It is the group’s policy to value non-controlling interests at fair value. The prevailing market price per ordinary share of Oba Limited at January 1, 2022, was ₦5.05.
The gain on the revaluation of property arose from an independent valuation of the group’s property in September 2022.
Administrative expenses of Oba Limited included N10,000,000 paid as management fees to Olu PLC, and the income has been duly recorded in Olu PLC’s books.
Income and expenses accrue evenly over the period.

Required:

a. Prepare the consolidated statement of profit or loss and other comprehensive income for Olu Group for the year ended September 30, 2022. (12 Marks)

b. Calculate the goodwill on acquisition and the non-controlling interest at the reporting date. (4 Marks)

c. IFRS 10 – Consolidated Financial Statements states that a parent must present consolidated financial statements for its investments in subsidiaries.

Required:
State FOUR exceptions to this pronouncement. (4 Marks)

Answer

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Tags: consolidated financial statements, Elimination of Intragroup Transactions, Fair Value, Goodwill, IFRS 10, Non-Controlling Interest, Profit or Loss
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2023

FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

Question

The trial balance is as follows:

Description	Debit (N’m)	Credit (N’m)
Ordinary share capital		43,200
Revenue		125,280
Staff cost	18,720
Leasehold building	21,600
Patent rights	4,320
Work-in-progress (Jan 1, 2018)	9,000
Accum. Depreciation on building (Jan 1, 2018)		4,320
Inventories of finished goods (Jan 1, 2018)	11,160
Consultancy fee	3,168
Directors’ salaries	25,920
Computer at cost (Hardware)	3,600
Accum. Depreciation on computer (Jan 1, 2018)		1,440
Retained earnings (Jan 1, 2018)		8,712
Dividend paid	9,000
Cash and bank	31,680
Trade receivables	30,240
Trade payables		6,624
Sundry expenses	21,168
Totals	189,576	189,576

Additional information:

On January 1, 2018, buildings were revalued to N25,920 million. This has not been reflected in the accounts.
Computer (hardware) is depreciated over five years. Buildings are now to be depreciated over 30 years.
The patent rights relate to a computer software with a 3-year life span.
An allowance for bad debts of 5% is to be created.
Closing inventories of finished goods are valued at N12,960 million. Work-in-progress has increased to N10,080 million.
There is an estimated liability for current tax of N8,640 million, which has not been recognized.

Required:

Prepare a draft statement of profit or loss (analyzing expenses by nature) for the year ended December 31, 2018. (6 Marks)
Prepare a statement of changes in equity for the year ended December 31, 2018. (4 Marks)
Prepare a statement of financial position as at December 31, 2018. (6 Marks)

Answer

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Tags: Financial Statements, IAS 1, Profit or Loss, Revaluation, Statement of Changes in Equity, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2019

FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

Question

Gbenga Nigeria Plc trial balance as at December 31, 2019 is shown below:

Item	N’000	N’000
Revenue		2,290,125
Administrative expenses	237,150
Selling and distribution expenses	175,200
Legal and professional expenses	81,150
Allowance for receivables		8,625
Inventories – finished goods – 31/12/18	276,750
Work-in-progress – 31/12/18	49,125
Inventories – raw materials at cost – 31/12/18	162,600
Purchases – raw materials	1,125,900
Carriage inwards – raw materials	15,750
Manufacturing wages	375,000
Manufacturing overheads	187,500
Authorised and issued 900,000 ordinary shares of 50 kobo each fully paid		450,000
150,000 8.4% cumulative preference shares of N1 each fully paid		150,000
Revaluation surplus		65,000
Share premium		150,000
General reserve		85,000
Retained earnings – 31/12/18		425,250
Patents and trademarks	323,250
Motor vehicle at cost	112,500
Freehold property at cost	375,000
Leasehold property at cost	112,500
Plant and equipment at cost	225,000
Furniture and fittings at cost	75,000
Amortisation of leasehold property – 31/12/18		22,500
Accumulated depreciation @ 31/12/2018:
– Plant and equipment		102,750
– Furniture and fittings		23,625
– Motor vehicles		37,500
10% loan notes		150,000
Trade payables		146,250
Trade receivables	266,445
Bank overdraft		76,875
Cash	7,680
	4,183,500	4,183,500

Additional information:
(i) A gain of N20,000 made on the revaluation of old freehold property during the year is yet to be accounted for.
(ii) Inventories at December 31, 2019 were:

Raw materials: N168,900
Finished goods: N413,025
Work-in-progress: N56,700

Plant and equipment 8% on cost – charged to production
Furniture and fittings 10% on cost – charged to administration
Motor vehicles 20% on carrying amount – charged 25% to administration and 75% to selling and distribution.

(vii) Income tax on the profit for the year is estimated at N68,900 and is due for payment on February 28, 2020.

Required:
Prepare the statement of profit or loss and other comprehensive income for the year ended December 31, 2019.

Answer

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Tags: Depreciation, Expenses, IAS 1, OCI, Profit or Loss, Revenue
Level: Level 2

Topic: Presentation of Financial Statements (IAS 1)
Series: NOV 2020

FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

This question involves calculating the profit or loss on the disposal of a non-current asset.

Question

A non-current asset with an original cost of N500,000 and accumulated depreciation of N400,000 was disposed of for N80,000. Calculate the profit or loss on disposal.

Answer

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Tags: Asset Disposal, Profit or Loss
Level: Level 1

Topic: Depreciation Methods and Accounting for Disposals
Series: MAY 2013

Question Tag: Profit or Loss

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

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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.

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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.

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CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

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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.

Additional Information:

Requirements:

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FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

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FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

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FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

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FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

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FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

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

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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.

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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.

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CR – May 2019 – L3 – Q6 – Presentation of Financial Statements (IAS 1)

Discuss reclassification adjustments and integrated reporting objectives and challenges.

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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.

Additional Information:

Requirements:

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FR – May 2021 – L2 – Q3b – Impairment of Assets (IAS 36)

Prepare a statement of profit or loss for Wizkid Bottling Company Plc showing continuing and discontinued operations.

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FR – May 2024 – L2 – SA – Q3 – Consolidated Financial Statements

Preparation of consolidated financial statements, calculation of goodwill, and non-controlling interest.

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FR – Nov 2019 – L2 – Q1b – Presentation of Financial Statements (IAS 1)

Prepare financial statements for Uchena Nigeria Plc, including profit or loss, changes in equity, and financial position.

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FR – Nov 2020 – L2 – Q4 – Presentation of Financial Statements (IAS 1)

Prepare the Statement of Profit or Loss and Other Comprehensive Income for Gbenga Nigeria Plc based on provided trial balance.

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FA – May 2013 – L1 – SA – Q26 – Depreciation Methods and Accounting for Disposals

This question involves calculating the profit or loss on the disposal of a non-current asset.

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