CR – Apr 2022 – L3 – Q1 – Consolidated financial statements, Business combinations and consolidation,

Prepare a consolidated statement of financial position for a group of companies considering complex adjustments for goodwill, impairments, and non-controlling interests.

Question

Below are the statements of financial position for three companies as of 31 July 2021:

Statements of Financial Position as at 31 July 2021	Papa Plc GH¢’million	Mama Plc GH¢’million	Bebe Plc GH¢’million
Non-current assets:
Property, plant, and equipment	3,888	1,680	1,224
Investments	3,560	2,600	200
Total non-current assets	7,448	4,280	1,424
Current assets:
Inventories	1,080	368	300
Trade receivables	1,376	416	100
Cash & bank	368	104	64
Total current assets	2,824	888	464
Total assets	10,272	5,168	1,888
Equity:
Share capital of GH¢1 each	4,000	1,200	640
Revaluation surplus	2,400	960	400
Retained earnings	1,432	800	760
Total equity	7,832	2,960	1,800
Current liabilities:
Trade payables	1,144	1,080	56
Taxation	1,296	1,128	32
Total current liabilities	2,440	2,208	88
Total equity and liabilities	10,272	5,168	1,888

Additional information:

Papa Plc bought 720 million shares in Mama Plc on 1 August 2019 at GH¢2.50 per share in cash. On that date, Mama’s retained earnings were GH¢480 million, and net assets equaled their carrying amounts except for property, plant, and equipment, which had a fair value excess of GH¢320 million.
Papa implements a policy of carrying property, plant, and equipment at fair values across group companies from the date of acquisition.
On 1 August 2020, Mama bought 512 million shares in Bebe Plc. The consideration was GH¢3 per share in cash with an additional payment of GH¢1 per share due on 31 July 2022. The fair value of the contingent consideration was GH¢320 million on 1 August 2020 and GH¢416 million on 31 July 2021. Bebe’s retained earnings were GH¢664 million, and the revaluation surplus was GH¢360 million.
Bebe controls the brand “Y start,” with a fair value of GH¢40 million and a useful life of 20 years. This has not been recognized in the accounts.
Papa uses the fair value method for non-controlling interests, using GH¢2.50 per share for this purpose.
Goodwill impairment loss of GH¢40 million for Mama and GH¢20 million for Bebe was recognized on 31 July 2021.
Mama bought goods from Bebe for GH¢16 million, with 60% unsold at year-end. These goods cost Bebe GH¢12 million.

Required: Prepare the Consolidated Statement of Financial Position for Papa Group as of 31 July 2021, in accordance with IFRS.

Answer