- 30 Marks
Question
The following are the financial statements of Papa, Tata, and Chebe, all Plcs. as at March 31, 2017:
| Papa (N’m) | Tata (N’m) | Chebe (N’m) | |
|---|---|---|---|
| Assets: | |||
| Tangible non-current assets | 1,280 | 440 | 280 |
| Investment in Tata | 413 | – | – |
| Investment in Chebe | 60 | – | – |
| Current assets | 531 | 190 | 130 |
| Total assets | 2,284 | 630 | 410 |
Equity and liabilities:
| Equity and Liabilities | Papa (N’m) | Tata (N’m) | Chebe (N’m) |
|---|---|---|---|
| Share capital of N1 each | 800 | 240 | 200 |
| Share premium | 150 | 20 | 30 |
| Revaluation reserve | 90 | – | – |
| Retained earnings | 390 | 210 | 94 |
| Total equity | 1,430 | 470 | 324 |
| Non-current liabilities | 640 | 30 | 16 |
| Current liabilities | 214 | 130 | 70 |
| Total equity and liabilities | 2,284 | 630 | 410 |
Papa acquired the following shareholdings in Tata and Chebe:
| Date of acquisition | Holding acquired | Fair value of net assets | Purchase consideration |
|---|---|---|---|
| Tata | April 1, 2014 | 30% | 325 |
| April 1, 2016 | 50% | 460 | |
| Chebe | April 1, 2016 | 25% | 200 |
You are also provided with the following information, which will be relevant to the consolidated financial statements of Papa Plc:
(i) None of the companies has issued any additional share capital since April 1, 2014.
(ii) The financial statements of Papa have not yet been adjusted for the gain or loss arising on gaining control of Tata.
(iii) At April 1, 2014, the carrying value of the net assets of Tata was the same as their fair value of N325 million.
(iv) Papa Plc. wishes to use the full fair value method of accounting for the acquisition of Tata, and at April 1, 2016 the estimated value of goodwill attributable to non-controlling interests was N3 million. The estimated fair value of the initial investment in 30% of the shares of Tata was N150 million at March 31, 2017.
(v) Included in the tangible non-current assets of Tata is land, valued at cost, which on March 31, 2017 had a fair value of N25 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vi) At April 1, 2016, the fair value of Chebe’s land was N16 million in excess of its carrying value. There has been no subsequent significant change in that value.
(vii) Goodwill arising on acquisition is tested for impairment at each year-end. At March 31, 2017, an impairment loss of N15 million was recognised for Tata.
(viii) There has been no impairment of the investment in Chebe.
Required:
Prepare the consolidated statement of financial position of Papa Group as at March 31, 2017.
(Total 30 Marks)
Answer
Consolidated statement of financial position as at March 31, 2017:
| Assets | N’m |
|---|---|
| Tangible non-current assets | 1,745 |
| Intangible non-current assets – goodwill | 30 |
| Investment in associate (Chebe) | 95 |
| Current assets | 721 |
| Total Assets | 2,591 |
Equity and liabilities:
| Equity and Liabilities | N’m |
|---|---|
| Share capital of N1 each | 800 |
| Share premium | 150 |
| Revaluation reserve | 90 |
| Retained earnings | 438 |
| Total equity attributable to owners | 1,478 |
| Non-controlling interest (Tata) | 99 |
| Total equity | 1,577 |
| Non-current liabilities | 670 |
| Current liabilities | 344 |
| Total Equity and liabilities | 2,591 |
Working Notes and Key Calculations
- Tangible Non-Current Assets:
- The combined value includes the fair value adjustments for Tata’s and Chebe’s land, reflecting an additional N25 million for Tata and N16 million for Chebe.
- Goodwill Calculation:
- Goodwill on Tata is calculated using the fair value of the purchase consideration, the fair value of non-controlling interests, and the fair value of net assets.
- Goodwill impairment of N15 million is deducted from the total goodwill.
- Investment in Associate (Chebe):
- Papa’s 25% holding in Chebe is treated as an investment in an associate and valued at 25% of Chebe’s net assets post-acquisition.
- Retained Earnings:
- Retained earnings include Papa’s earnings, adjusted for Papa’s share of Tata’s post-acquisition profits and goodwill impairment losses.
- Non-Controlling Interest (NCI):
- NCI is based on Tata’s 20% post-acquisition net assets, plus an allocation of goodwill attributable to the NCI.
The resulting consolidated statement of financial position for Papa Group reflects the adjustments and valuations based on the acquisition and fair value information provided.
- Topic: Consolidated Financial Statements (IFRS 10)
- Series: NOV 2017
- Uploader: Dotse