FR – May 2021 – L2 – Q4 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated statement of profit or loss and financial position for Bottle Nigeria Plc.

Question

Bottle Nigeria Plc acquired 80% of Glass Limited’s equity share since its incorporation about 10 years ago.

The two companies’ draft financial statements as at December 31, 2019, are as follows:

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

	Bottle Nigeria Plc	Glass Limited
Revenue	N225,000	N45,000
Cost of Sales	(N130,500)	(N27,000)
Gross Profit	N94,500	N18,000
Other Expenses	(N76,500)	(N14,400)
Profit Before Tax	N18,000	N3,600
Income Tax Expense	(N5,850)	(N1,125)
Profit for the Year	N12,150	N2,475

Statement of Financial Position as at December 31, 2019:

	Bottle Nigeria Plc	Glass Limited
Assets
Non-Current Assets:
Property, Plant & Equipment	N86,400	N9,000
Investment in Glass Ltd	N3,600	—
Total Non-Current Assets	N90,000	N9,000
Current Assets
Inventories	N22,500	N5,400
Trade Receivables	N29,250	N1,800
Cash & Cash Equivalents	N17,550	N1,575
Total Current Assets	N69,300	N8,775
Total Assets	N159,300	N17,775

Equity and Liabilities:

	Bottle Nigeria Plc	Glass Limited
Equity
Ordinary Share Capital	N90,000	N4,500
Retained Earnings	N22,500	N10,800
Total Equity	N112,500	N15,300
Current Liabilities
Trade Payables	N40,950	N1,350
Current Tax Liabilities	N5,850	N1,125
Total Current Liabilities	N46,800	N2,475
Total Equity and Liabilities	N159,300	N17,775

Additional Information:

On December 31, 2019, Bottle Nigeria Plc dispatched goods that cost N3,600,000 to Glass Limited at an invoice price of N4,500,000. Glass Limited received the goods on January 2, 2020, and recorded the transaction on that date.
The group’s policy is to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary’s identifiable net assets.

Required:

i. Prepare Bottle Group’s draft consolidated statement of profit or loss for the year ended December 31, 2019. (8 Marks)

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

iii. Explain the term “cash and cash equivalent” under IAS 7 Statement of Cash Flows. (2 Marks)

Answer

i. Consolidated Statement of Profit or Loss for the Year Ended December 31, 2019

Description	N’000
Revenue (225,000 + 45,000 – 4,500)	265,500
Cost of Sales (130,500 + 27,000 – 4,500 + 900)	(153,900)
Gross Profit	111,600
Other Expenses (76,500 + 14,400)	(90,900)
Profit Before Tax	20,700
Income Tax Expense (5,850 + 1,125)	(6,975)
Profit for the Year	13,725
Profit Attributable to:
Owners of the Parent	13,230
Non-Controlling Interest (20% x 2,475)	495
Total Profit	13,725

ii. Consolidated Statement of Financial Position as at December 31, 2019

Description	N’000
Non-Current Assets
Property, Plant & Equipment (86,400 + 9,000)	95,400
Current Assets
Inventories (22,500 + 5,400 + 3,600)	31,500
Trade Receivables (29,250 + 1,800 – 4,500)	26,550
Cash and Cash Equivalents (17,550 + 1,575)	19,125
Total Assets	172,575
Equity and Liabilities
Equity Attributable to Owners of the Parent
Ordinary Share Capital	90,000
Retained Earnings (W5)	30,240
Total Equity	120,240
Non-Controlling Interest (W4)	3,060
Total Equity	123,300
Current Liabilities
Trade Payables (40,950 + 1,350)	42,300
Current Tax Liabilities (5,850 + 1,125)	6,975
Total Liabilities	49,275
Total Equity and Liabilities	172,575

iii. Cash and Cash Equivalents (IAS 7):

Cash and cash equivalents comprise cash in hand, demand deposits, and short-term, highly liquid investments readily convertible to known amounts of cash and subject to an insignificant risk of value change. These are held to meet short-term cash commitments, not for investment purposes. Examples include bank deposits requiring short withdrawal notice and investments with a maturity of three months or less from acquisition date.

Tags: Consolidation, Financial Statements, IFRS 10, Non-Controlling Interest
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)
Series: MAY 2021

Uploader: Kwame Aikins