FR – Nov 2015 – L2 – Q1 – Consolidated Financial Statements (IFRS 10)

Prepare consolidated financial statements for Hapu Plc and Sege Plc for the year ended December 31, 2014.

Question

Statement of financial position as at December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Assets
Non-current assets:
Property, plant, and equipment	32,000	25,000
Investments	33,500	–
Total non-current assets	65,500	25,000
Current assets
Cash at bank and in hand	9,500	2,000
Trade receivables	20,000	8,000
Inventory	30,000	18,000
Total current assets	125,000	53,000
Equity and liabilities
Share capital	40,000	10,000
Share premium	6,500	–
Retained earnings	55,000	37,000
Total equity	101,500	47,000
Current liabilities	23,500	6,000
Total equity and liabilities	125,000	53,000

Statement of profit or loss for the year ended December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Revenue	125,000	117,000
Cost of sales	(65,000)	(64,000)
Gross profit	60,000	53,000
Distribution costs	(21,000)	(14,000)
Administrative expenses	(14,000)	(8,000)
Profit before taxation	25,000	31,000
Income tax expense	(10,000)	(9,000)
Profit for the year	15,000	22,000

Statement of changes in equity (extract) for the year ended December 31, 2014

	Hapu Plc (₦’000)	Sege Plc (₦’000)
Retained earnings brought forward	40,000	15,000
Retained profit for the year	15,000	22,000
Retained earnings carried forward	55,000	37,000

Additional Information:

Hapu Plc owns 80% of Sege’s shares, purchased in 2011 for ₦20.5 million when Sege’s retained earnings stood at ₦7 million.
Included in Sege’s inventory as of December 31, 2014, were goods purchased from Hapu for ₦3.9 million, with a 30% profit margin on cost. Total sales from Hapu to Sege amounted to ₦6 million.
Hapu Plc and Sege Plc proposed dividends of ₦2 million and ₦2.5 million respectively, not yet accounted for.
Goodwill impairment tests indicate no impairment in accordance with IFRS 3 and IAS 36.

Required:
Prepare the consolidated statement of profit or loss and the consolidated statement of financial position for Hapu Plc and Sege Plc as at December 31, 2014.

Answer

a) Hapu Plc
Consolidated statement of profit or loss
for the year ended December 31, 2014