Subsidiaries – Knowsia

FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

Question

On 31 December Year 5, an associate, Anita Healthcare Ltd, holds inventory which is valued at GH¢32,000 purchased during the year from its investor Pamela Wellness Ltd. At the same date, Pamela Wellness Ltd holds inventory purchased from a subsidiary, Sophie Pharmaceuticals Ltd, which is valued at GH¢80,000.
Sales from Pamela Wellness Ltd to Anita Healthcare Ltd and from Sophie Pharmaceuticals Ltd to Pamela Wellness Ltd are priced at a mark-up of one-quarter on cost.
Pamela Wellness Ltd owns 30% of Anita Healthcare Ltd and 60% of Sophie Pharmaceuticals Ltd.

Required
Set out the adjustments necessary to reflect any unrealised profit in the above in the consolidated statement of financial position.

Answer

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Tags: Associates, Consolidation, Financial Statements, IAS 2, IAS 28, IFRS 3, Inventory, Subsidiaries, Unrealised Profit
Level: Level 2

Topic: Business Combinations (IFRS 3)

FR – L2 – Q60 – Financial Reporting Standards and Their Applications

Prepare a note for Bawku Limited’s financial statements disclosing related party transactions per IAS 24 for 20X4.

Question

Bawku Limited is engaged in the manufacturing of specialized spare parts for automobile assemblers. During the year 20X4, the company has undertaken the following transactions with its related parties:
(i) Sales of GH₵500 million were made to its only subsidiary Akyem Auto Limited (AAL). Being the subsidiary, a special discount of GH₵25 million was allowed to AAL.
(ii) AAL returned spare parts worth GH₵5.5 million.
(iii) Raw materials of GH₵5 million were purchased from Asante Enterprises, which is owned by the wife of the CFO of Bawku Limited.
(iv) Equipment worth GH₵3 million was purchased from Kofi Limited (KL). The wife of the Production Director of the company is a director in KL.
(v) The company awarded a contract for supply of two machines amounting to GH₵7 million per machine to an associated company.
(vi) In 20X2, an advance of GH₵2 million was given to the Chief Executive of the company. During the year 20X4, he repaid GH₵0.3 million. The balance outstanding as on December 31, 20X4 was GH₵1,100,000.

Required
Prepare a note for inclusion in the company’s financial statements in accordance with the requirement of IAS 24 Related Party Disclosures.

Answer

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Tags: Accounting Standards, Associates, Disclosures, Financial Reporting, Financial Statements, IAS 24, Key Management, Related Party Disclosures, Subsidiaries, Transactions
Level: Level 2

Topic: Financial Reporting Standards and Their Applications

FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

Question

Earley Enterprises is finalising its accounts for the year ended 31 December 20X3. The following events have arisen since the year end and the financial director has asked you to comment on the final accounts.

(a) At 31 December 20X3 trade receivables included a figure of GH¢250,000 in respect of NedenCorp. On 8 March 20X4, when the current debt was GH¢200,000, NedenCorp went into receivership. Recent correspondence with the receiver indicates that no dividend will be paid to unsecured creditors.

(b) On 15 March 20X4 Earley Enterprises sold its former head office building, Whiteley Grove, for GH¢2.7 million. At the year end the building was unoccupied and carried at a value of GH¢3.1 million.

(c) Inventories at the year-end included GH¢650,000 of a new electric tricycle the Oparis. In January 20X4 the European Union declared the tricycle to be unsafe and prohibited it from sale. An alternative market, in Bongaria, is being investigated, although the current price is expected to be cost less 30%.

(d) Stingray Ltd, a subsidiary in Outer Sarnia, was nationalised in February 20X4. The Outer Sarnia authorities have refused to pay any compensation. The net assets of Stingray Ltd have been valued at GH¢200,000 at the year end.

(e) Freak floods caused GH¢150,000 damage to the Southridge branch of Earley Enterprises in January 20X4. The branch was fully insured.

(f) On 1 April 20X4 Earley Enterprises announced a 1 for 1 rights issue aiming to raise GH¢15 million.

Required

Explain how you would respond to the matters listed above.

Answer

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Tags: Adjustments, Disclosures, Events After Reporting Period, Financial Statements, IAS 10, Impairment, Inventories, Subsidiaries
Level: Level 2

Topic: Events After the Reporting Period

Tag (SQ): Subsidiaries

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FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

FR – L2 – Q60 – Financial Reporting Standards and Their Applications

Prepare a note for Bawku Limited’s financial statements disclosing related party transactions per IAS 24 for 20X4.

FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

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FR – L2 – Q95 – Business Combinations

Adjust unrealised profit in inventory for consolidation of Anita Healthcare Ltd, Pamela Wellness Ltd, and Sophie Pharmaceuticals Ltd.

You're reporting an error for "FR – L2 – Q95 – Business Combinations"

FR – L2 – Q60 – Financial Reporting Standards and Their Applications

Prepare a note for Bawku Limited’s financial statements disclosing related party transactions per IAS 24 for 20X4.

You're reporting an error for "FR – L2 – Q60 – Financial Reporting Standards and Their Applications"

FR – L2 – Q46 – Events After the Reporting Period

Explain accounting treatment for post-year-end events affecting receivables, property, inventory, subsidiaries, and other events for Earley Enterprises.

You're reporting an error for "FR – L2 – Q46 – Events After the Reporting Period"

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