Topic: Consolidated Financial Statements

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CR – Nov 2024 – L3 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Okaekwei PLC, considering acquisitions and fair value adjustments.

Question

The following financial statements relate to Okaekwei PLC (Okaekwei), Ablekuma PLC (Ablekuma), and Katamanso PLC (Katamanso), three companies operating in the manufacturing industry.

Statement of Financial Position as at 31 October 2024

Description	Okaekwei (GH¢’000)	Ablekuma (GH¢’000)	Katamanso (GH¢’000)
Non-current assets:
Property, plant and equipment	88,307	53,657	82,875
Investments	102,500	78,095	–
Total Non-current Assets	190,807	131,752	82,875
Current assets:
Inventory	9,492	4,618	14,642
Trade receivables	4,573	8,101	18,085
Cash and Bank	11,625	4,599	30,056
Total Current Assets	25,690	17,318	62,783
Total Assets	216,497	149,070	145,658
Equity & Liabilities:
Share capital (GH¢1)	106,250	63,750	61,625
Retained earnings	38,607	42,361	27,025
Other component of equity	3,825	3,060	2,678
Total Equity	148,682	109,171	91,328
Liabilities:
Non-current liabilities	40,851	20,327	31,582
Current liabilities	26,964	19,572	22,748
Total Liabilities	67,815	39,899	54,330
Total Equity & Liabilities	216,497	149,070	145,658

Additional Information:

Acquisition of Katamanso:
- On 1 November 2023, Ablekuma acquired 60% of the ordinary shares of Katamanso at a cost of GH¢55 million.
- Due diligence costing GH¢0.25 million was undertaken and included in the investment cost.
- Retained earnings and other components of equity of Katamanso at acquisition were GH¢21.6 million and GH¢1.65 million, respectively.
Fair Value Adjustments:
- A fair value exercise was conducted, with a building’s fair value exceeding its carrying value by GH¢1.2 million (remaining useful life: 20 years).
- The financial statements of Katamanso do not yet reflect this adjustment.
- Non-controlling interest is measured using the proportionate share of identifiable net assets.
Acquisition of Ablekuma by Okaekwei:
- On 1 November 2022, Okaekwei purchased 80% of the ordinary shares of Ablekuma for GH¢92 million.
- The investment value reflects the fair value of the subsidiary at 31 October 2024.
- Retained earnings and other equity components at acquisition: GH¢29.6 million and GH¢2.32 million.
Deferred Tax on Fair Value Adjustments:
- Deferred tax is to be provided at 25% on temporary differences arising from fair value adjustments.
Intragroup Transactions:
- On 1 June 2024, Ablekuma sold inventory (cost: GH¢2 million) to Katamanso for GH¢1.8 million.
- As of 31 October 2024, these goods were still in Katamanso’s inventory, valued at the purchase cost. The fair value of the inventory at year-end was GH¢1.78 million.
Intragroup Transfer of PPE:
- On 1 August 2024, Okaekwei transferred a production machine to Ablekuma at GH¢2 million (carrying value: GH¢2.4 million).
- The remaining useful life was five years, but Ablekuma depreciates it over four years.
- Okaekwei harmonizes accounting policies upon consolidation.

Required:

Prepare the Consolidated Statement of Financial Position of Okaekwei PLC as at 31 October 2024.

(All workings are to be rounded to the nearest thousand).

Answer

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Tags: Consolidation Adjustments, Goodwill, Group Accounts, Intragroup Transactions, Non-Controlling Interest
Level: Level 3

Topic: Business Combinations (IFRS 3), Consolidated Financial Statements
Series: Nov 2024

FR – May 2022 – L2 – SB – Q3 – Consolidated Financial Statements

Prepare a consolidated statement of financial position for Daddy PLC as of December 31, 2020, incorporating the acquisition of Mummy PLC.

Question

Daddy PLC is a first-tier entity quoted on the Nigerian Stock Exchange (NSE). The entity acquired 640 billion equity shares in Mummy PLC on January 1, 2020. The purchase consideration comprised the following:

Issue of one ordinary share of Daddy PLC in exchange for every two shares in Mummy PLC.
Issue of N100 12% loan notes in Daddy PLC in exchange for every 400 shares in Mummy PLC.
A cash payment of 15 kobo per share for every share acquired in Mummy PLC on January 1, 2020.

At the date of acquisition, the market price of Daddy PLC’s shares was 75 kobo each. The cost incurred by banks when a fixed-rate loan is paid out early is assumed to be nil. Also, Daddy PLC has recorded the 12% loan notes in the purchase consideration in the accounts.

Below are the statements of financial position for Daddy PLC and Mummy PLC as of December 31, 2020:

Additional Information:

Mummy PLC’s net assets were at fair value except for an item of property, which had a fair value N50 billion higher than its carrying amount.
The fair value of non-controlling interests at the date of acquisition was N100 billion.
Mummy PLC sold goods worth N20 billion to Daddy PLC. N5 billion of these were included in Daddy PLC’s inventory as of December 31, 2020.
Goodwill impairment of N30 billion.

You are required to prepare the consolidated statement of financial position as at December 31, 2020.

Answer

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Tags: Acquisition Accounting, Business Combinations, Consolidation, Group Accounts
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2022

CR – May 2020 – L3 – Q1 – Consolidated Statement of Financial Position

Prepare the consolidated statement of financial position for Phato Ltd and its subsidiaries as at 30 September 2019, including relevant calculations for goodwill, non-controlling interest, and asset impairments.

Question

Phato Ltd, is a Public Limited Liability Company which operates in the service sector in Ghana. Phato Ltd has a business relationship with two other Ghanaian companies, Sakara Ltd and Saadi Ltd, which are public limited liability companies too. The draft statements of financial position of these three companies are as below as at 30 September 2019.

Phato Ltd GH¢ million	Sakara Ltd GH¢ million	Saadi Ltd GH¢ million
Assets:
Non-current assets
Property, plant, and equipment	460.0	150.0
Investment in subsidiaries
Sakara Ltd	365.0
Saadi Ltd	160.0
Investment in Azuri Ltd	24.0
Intangible assets	99.0	15.0
Total Non-current assets	948.0	325.0
Current assets	447.5	240.0
Total assets	1,395.5	565.0
Equity and liabilities:
Equity:
Share capital	460.0	200.0
Other components of equity	36.5	18.5
Retained earnings	447.5	221.0
Total equity	944.0	439.5
Non-current liabilities	247.5	61.5
Current liabilities	204.0	64.0
Total liabilities	451.5	125.5
Total equity and liabilities	1,395.5	565.0

Additional relevant information:

Phato Ltd, on 1 October 2017, acquired 60% of the equity interests of Sakara Ltd. The cost of the investment comprised cash of GH¢360 million. At acquisition, the fair value of the non-controlling interest in Sakara Ltd was estimated at GH¢146 million. The fair value of the identifiable net assets acquired totaled GH¢417.5 million, including retained earnings of GH¢159.5 million and other components of equity at GH¢13.5 million. The excess in fair value results from non-depreciable land.
Sakara Ltd, on 1 October 2018, acquired 70% of Saadi Ltd for GH¢160 million. The fair value of non-controlling interest was estimated at GH¢36 million. The fair value of the identifiable net assets of Saadi Ltd at acquisition was GH¢181 million, retained earnings GH¢53 million, and other components of equity GH¢10 million.
Phato Ltd acquired a 14% interest in Azuri Ltd for GH¢9 million on 1 October 2017. On 1 April 2019, Phato Ltd acquired an additional 16% interest in Azuri Ltd for GH¢13.5 million, achieving significant influence.
Phato Ltd purchased patents for GH¢5 million and incurred other development costs for product development.
Impairment tests were conducted on Sakara Ltd and Saadi Ltd.

Required:
Prepare the consolidated statement of financial position for the Phato Ltd Group as at 30 September 2019.

Answer

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Tags: Business Combinations, Consolidation, Goodwill, IFRS, Impairment, Investment
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: MAY 2020

CR – Nov 2020 – L3 – Q1i – Consolidated Profit or Loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for a parent, foreign subsidiary, and associate, accounting for goodwill impairment, disposal, and foreign currency translation.

Question

Bolga Ltd is a limited liability company in Ghana, which has investments in a number of other companies. The draft statements of profit or loss for Bolga Ltd and its other investments for the year ended April 30, 2020, are given below:

	Bolga Ltd	Navrongo Ltd	Serrekunda Ltd
Revenue	GH¢286,000	GH¢136,000	GMD840,000
Cost of sales	(GH¢122,000)	(GH¢84,000)	(GMD504,000)
Gross profit	GH¢164,000	GH¢52,000	GMD336,000
Distribution costs	(GH¢20,000)	(GH¢12,000)	(GMD56,000)
Administrative expenses	(GH¢46,000)	(GH¢20,000)	(GMD116,000)
Operating profit	GH¢98,000	GH¢20,000	GMD164,000
Investment income	GH¢2,000	GH¢4,000	–
Finance costs	(GH¢4,000)	(GH¢8,000)	(GMD12,000)
Profit before tax	GH¢96,000	GH¢16,000	GMD152,000
Income tax expenses	(GH¢22,000)	(GH¢4,000)	(GMD36,000)
Profit for the period	GH¢74,000	GH¢12,000	GMD116,000

Additional relevant information:
i) Bolga Ltd purchased 80% of Navrongo Ltd’s three million GH¢5 ordinary shares for GH¢12 million two years ago. At the acquisition date, the carrying value of Navrongo’s net assets was GH¢10 million, and this was deemed to be the same as their fair value. The non-controlling interest was measured using the proportion of net assets method. Goodwill on acquisition of Navrongo is not impaired. On 31 October 2019, Bolga Ltd sold one million, four hundred and forty thousand of its shares in Navrongo Ltd for GH¢13 million. The fair value of the interest retained was GH¢19 million. The retained earnings of Navrongo Ltd was GH¢5 million as at April 30, 2019. The only entry posted in Bolga Ltd’s individual financial statements was the GH¢13 million cash received. This was debited to the bank account and the credit posted to the suspense account.

ii) On 1 May 2019, Bolga Ltd acquired 60% of Serrekunda Ltd’s one million GMD1 ordinary shares for GMD284 million. Serrekunda is a Gambian-based company with Gambian Dalasi (GMD) as its currency. The non-controlling interest at acquisition was valued at GMD116 million using the fair value method. At 1 May 2019, the carrying amount of Serrekunda Ltd’s net assets was GMD240 million but the fair value was GMD280 million. The excess in the fair value was due to a brand with a remaining useful economic life of 5 years at the date of acquisition.

On 30 April 2020, it was determined that goodwill arising on the purchase of Serrekunda Ltd was impaired by GMD16 million. Goodwill impairments are charged as administrative expenses.

iii) On 28 February 2020, Navrongo Ltd paid a dividend of GH¢2 million to its ordinary shareholders.

iv) On 1 June 2019, Bolga Ltd started construction of a new building project and financed this out of its general borrowings. The construction was completed on 30 April 2020 at a total cost of GH¢20 million, excluding interest on borrowings. Bolga Ltd has had the following loans outstanding for the whole financial year:

10% bank loan: GH¢28,000
8% loan notes: GH¢12,000

All the interest for the year has been expensed to the statement of profit or loss. None of the loan notes are held by any other companies within Bolga Ltd.

v) On 1 November 2019, Bolga Ltd granted 20,000 share options to each of its 100 managers. These options will vest on 31 October 2021 if the managers are still employed. However, five managers had left the company by 30 April 2020, and it is expected that another five will leave by 31 October 2021. The fair value of the share options was GH¢3.10 on 1 November 2019, and GH¢10 on 30 April 2020. There have not been any accounting entries posted in relation to this scheme.

vi) The following exchange rates are relevant:

GMD: GH¢1
- May 1 2019: 10.0
- April 30 2020: 8.0
- Average for the year ended 30 April 2020: 9.2

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 April 2020.

Answer

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Tags: Associate, Consolidation, Disposal, Fair Value, Foreign subsidiary, Goodwill, Profit or Loss
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: NOV 2020

CR – May 2021 – L3 – Q1 – Consolidation with Subsidiaries and Associate

Prepare consolidated statement of financial position including two subsidiaries and an associate. Adjust for goodwill, non-controlling interest, and contingent consideration.

Question

Required:
Prepare a consolidated statement of financial position as of 31 May 2020 for the Blavo Group.

Answer

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Tags: Associates, Business Combinations, Consolidation, Deferred Tax, Financial Statements, Goodwill, Non-Controlling Interests, Subsidiaries
Level: Level 3

CR – May 2021 – L3 – Q4b – Control Assessment of Tema Ltd

Discuss the control of Accra Ltd over Tema Ltd in accordance with IFRS 10.

Question

Accra Ltd, a government business entity, acquires 40% of the voting rights of Tema Ltd. The remaining investors each hold 5% of the voting rights of Tema Ltd. A shareholder agreement grants Accra Ltd the right to appoint, remove and set the remuneration of management responsible for key business decisions of Tema Ltd. To change this agreement, a two-thirds majority vote of the shareholders is required.

Required:
In accordance with IFRS 10: Consolidated Financial Statements, discuss whether Accra Ltd controls Tema Ltd. (5 marks)

Answer

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Tags: Consolidation, Control, IFRS 10, Subsidiary
Level: Level 3

Topic: Consolidated Financial Statements
Series: MAY 2021

FR – Nov 2017 – L2 – Q1a – Consolidation of Group Statements

This question tests candidates on preparing a consolidated statement of profit or loss and other comprehensive income for a group, accounting for goodwill, non-controlling interest, intra-group transactions, and fair value adjustments.

Question

On April 1, 2017, Higherhigher Limited acquired 60% of the equity share capital of Lowerlower Limited in a share exchange of two shares in Higherhigher for three shares in Lowerlower. The issue of shares has not yet been recorded by Higherhigher Limited. At the date of acquisition, shares in Higherhigher had a market value of N6 each.

Below is the summarised draft financial statements of both companies:

Statement of Profit or Loss and other Comprehensive Income for the year ended September 30, 2017	Higherhigher Limited (N’000)	Lowerlower Limited (N’000)
Revenue	2,720,000	1,344,000
Cost of sales	(2,016,000)	(1,024,000)
Gross profit	704,000	320,000
Distribution costs	(64,000)	(64,000)
Administrative expenses	(192,000)	(102,400)
Finance costs	(9,600)	(12,800)
Profit before tax	438,400	140,800
Income tax expense	(150,400)	(44,800)
Profit for the year	288,000	96,000

Additional information:

The fair value of Lowerlower Limited’s assets was equal to their carrying amounts, except for a plant with a fair value of N64m in excess of the carrying amount, which had a remaining life of five years. Straight-line depreciation was used. Lowerlower has not adjusted the carrying amount of its plant.
Sales from Lowerlower to Higherhigher after the acquisition were N256m, with a 40% mark-up. Higherhigher sold N166.4m of these goods by September 30, 2017.
Lowerlower’s receivables include N19.2m due from Higherhigher, which didn’t agree with Higherhigher’s payables due to cash in transit of N6.4m.
Non-controlling interest is measured at fair value. The fair value of the goodwill attributable to the non-controlling interest is N48m.
Consolidated goodwill was not impaired.

You are required to prepare:

The consolidated statement of profit or loss and other comprehensive income for the year ended September 30, 2017.

Answer

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Tags: consolidated financial statements, Depreciation Adjustment, Goodwill, Intra-Group Sales, Non-Controlling Interest, Profit Adjustment
Level: Level 2

Topic: Consolidated Financial Statements
Series: NOV 2017

FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated profit or loss and other comprehensive income for Adanna Plc and its subsidiary Ebuka Ltd for the year ended December 31, 2017.

Question

Adanna Plc has a subsidiary, Ebuka Limited. The statement of profit or loss and other comprehensive income for the companies is as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2017

	Adanna Plc (N’000)	Ebuka Limited (N’000)
Revenue	986,546	614,206
Cost of Sales	(593,204)	(365,903)
Gross Profit	393,342	248,303
Other Income	57,850	12,420
Distribution Costs	(69,496)	(40,562)
Administrative Expenses	(158,624)	(95,036)
Other Expenses	(32,108)	(15,814)
Finance Costs	(20,600)	(10,220)
Profit Before Tax	170,364	99,091
Income Tax Expense	(51,110)	(26,727)
Profit for the Year	119,254	72,364
Other Comprehensive Income:
Gain on Revaluation	68,166	29,202
Total Comprehensive Income	187,420	101,566

Additional Information:

Adanna Plc acquired 75% of the issued equity shares of Ebuka Limited three years ago. Goodwill on acquisition was N280 million. The recoverable amount of goodwill at the year-end was N268 million, marking the first time the recoverable amount had fallen below the initial recognition.
During the year, Ebuka Limited invoiced goods worth N300 million to Adanna Plc. A quarter of these goods were included in Adanna Plc’s inventory at the year-end. Ebuka Limited invoices goods at cost plus 25%.
Ebuka Limited’s distribution costs include depreciation of an asset subject to a fair value increase of N155 million on acquisition. The asset is being depreciated on a straight-line basis over ten years.
Adanna Plc’s other income includes an intercompany management charge of N10 million to Ebuka Limited, which was recognized as administrative expenses by Ebuka Limited.

Required: Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for Adanna Plc Group for the year ended December 31, 2017.

Answer

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Tags: Consolidation, Financial Reporting, Goodwill, Group Accounts, IFRS 10, Intercompany transactions, Non-Controlling Interest, Profit or Loss, Subsidiary
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2018

FR – May 2019 – L2 – Q1b – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position of Ajakaye Group Ltd, considering fair value adjustments and intra-group transactions.

Question

You are provided with the following statement of financial position for Ajakaye Limited and Ajalorun Limited.

Statement of Financial Position as at 31 March 2019	Ajakaye Ltd (₦’000)	Ajalorun Ltd (₦’000)
Non-current assets
Property, Plant & Equipment	367,500	84,000
Investment	140,000	–
Total non-current assets	507,500	84,000
Current assets
Inventory at cost	154,000	49,000
Trade receivables	101,500	73,500
Bank balance	70,000	–
Total current assets	325,500	122,500
Total assets	833,000	206,500
Equity and liabilities
Ordinary shares at ₦1 each	490,000	119,000
Retained earnings	150,500	35,000
Total equity	640,500	154,000
Current liabilities
Trade payables	192,500	38,500
Bank overdraft	–	14,000
Total current liabilities	192,500	52,500
Total equity and liabilities	833,000	206,500

Additional Information:

Ajakaye Ltd acquired 70% of the issued ordinary share capital of Ajalorun Ltd four years ago, when the retained earnings of Ajalorun were ₦14 million. There has been no impairment of goodwill.
For the purpose of the acquisition, property, plant & equipment with a carrying amount of ₦35 million was revalued to its fair value of ₦42 million. The revaluation was not recorded in the accounts of Ajalorun Ltd. Depreciation is charged at 20% using the straight-line method.
It is the group’s policy to value non-controlling interest at fair value.
The market price of the shares of the non-controlling shareholders just before the acquisition was ₦1.50.
Ajakaye Ltd sells goods to Ajalorun Ltd at a markup of 25%. At 31 March 2019, the inventories of Ajalorun Ltd included ₦31.5 million of goods purchased from Ajakaye Ltd.
Ajalorun Ltd owes Ajakaye Ltd ₦24.5 million for goods purchased, and Ajakaye Ltd owes Ajalorun Ltd ₦10.5 million.

Required:
Prepare the consolidated statement of financial position of Ajakaye Group Ltd as at 31 March 2019.

Answer

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Tags: Consolidation, Goodwill, Group Accounts, Non-Controlling Interest, Statement of Financial Position
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2019

FR – May 2019 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Explain the usefulness of consolidated financial statements

Question

Explain why consolidated financial statements are useful to the users of financial statements as opposed to just the parent company’s separate financial statements.

Answer

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Tags: Consolidation, Goodwill, Parent Company, Statement of Financial Position
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2019

CR – Nov 2024 – L3 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Okaekwei PLC, considering acquisitions and fair value adjustments.

Question

The following financial statements relate to Okaekwei PLC (Okaekwei), Ablekuma PLC (Ablekuma), and Katamanso PLC (Katamanso), three companies operating in the manufacturing industry.

Statement of Financial Position as at 31 October 2024

Description	Okaekwei (GH¢’000)	Ablekuma (GH¢’000)	Katamanso (GH¢’000)
Non-current assets:
Property, plant and equipment	88,307	53,657	82,875
Investments	102,500	78,095	–
Total Non-current Assets	190,807	131,752	82,875
Current assets:
Inventory	9,492	4,618	14,642
Trade receivables	4,573	8,101	18,085
Cash and Bank	11,625	4,599	30,056
Total Current Assets	25,690	17,318	62,783
Total Assets	216,497	149,070	145,658
Equity & Liabilities:
Share capital (GH¢1)	106,250	63,750	61,625
Retained earnings	38,607	42,361	27,025
Other component of equity	3,825	3,060	2,678
Total Equity	148,682	109,171	91,328
Liabilities:
Non-current liabilities	40,851	20,327	31,582
Current liabilities	26,964	19,572	22,748
Total Liabilities	67,815	39,899	54,330
Total Equity & Liabilities	216,497	149,070	145,658

Additional Information:

Acquisition of Katamanso:
- On 1 November 2023, Ablekuma acquired 60% of the ordinary shares of Katamanso at a cost of GH¢55 million.
- Due diligence costing GH¢0.25 million was undertaken and included in the investment cost.
- Retained earnings and other components of equity of Katamanso at acquisition were GH¢21.6 million and GH¢1.65 million, respectively.
Fair Value Adjustments:
- A fair value exercise was conducted, with a building’s fair value exceeding its carrying value by GH¢1.2 million (remaining useful life: 20 years).
- The financial statements of Katamanso do not yet reflect this adjustment.
- Non-controlling interest is measured using the proportionate share of identifiable net assets.
Acquisition of Ablekuma by Okaekwei:
- On 1 November 2022, Okaekwei purchased 80% of the ordinary shares of Ablekuma for GH¢92 million.
- The investment value reflects the fair value of the subsidiary at 31 October 2024.
- Retained earnings and other equity components at acquisition: GH¢29.6 million and GH¢2.32 million.
Deferred Tax on Fair Value Adjustments:
- Deferred tax is to be provided at 25% on temporary differences arising from fair value adjustments.
Intragroup Transactions:
- On 1 June 2024, Ablekuma sold inventory (cost: GH¢2 million) to Katamanso for GH¢1.8 million.
- As of 31 October 2024, these goods were still in Katamanso’s inventory, valued at the purchase cost. The fair value of the inventory at year-end was GH¢1.78 million.
Intragroup Transfer of PPE:
- On 1 August 2024, Okaekwei transferred a production machine to Ablekuma at GH¢2 million (carrying value: GH¢2.4 million).
- The remaining useful life was five years, but Ablekuma depreciates it over four years.
- Okaekwei harmonizes accounting policies upon consolidation.

Required:

Prepare the Consolidated Statement of Financial Position of Okaekwei PLC as at 31 October 2024.

(All workings are to be rounded to the nearest thousand).

Answer

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Tags: Consolidation Adjustments, Goodwill, Group Accounts, Intragroup Transactions, Non-Controlling Interest
Level: Level 3

Topic: Business Combinations (IFRS 3), Consolidated Financial Statements
Series: Nov 2024

FR – May 2022 – L2 – SB – Q3 – Consolidated Financial Statements

Prepare a consolidated statement of financial position for Daddy PLC as of December 31, 2020, incorporating the acquisition of Mummy PLC.

Question

Issue of one ordinary share of Daddy PLC in exchange for every two shares in Mummy PLC.
Issue of N100 12% loan notes in Daddy PLC in exchange for every 400 shares in Mummy PLC.
A cash payment of 15 kobo per share for every share acquired in Mummy PLC on January 1, 2020.

Below are the statements of financial position for Daddy PLC and Mummy PLC as of December 31, 2020:

Additional Information:

Mummy PLC’s net assets were at fair value except for an item of property, which had a fair value N50 billion higher than its carrying amount.
The fair value of non-controlling interests at the date of acquisition was N100 billion.
Mummy PLC sold goods worth N20 billion to Daddy PLC. N5 billion of these were included in Daddy PLC’s inventory as of December 31, 2020.
Goodwill impairment of N30 billion.

You are required to prepare the consolidated statement of financial position as at December 31, 2020.

Answer

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Tags: Acquisition Accounting, Business Combinations, Consolidation, Group Accounts
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2022

CR – May 2020 – L3 – Q1 – Consolidated Statement of Financial Position

Prepare the consolidated statement of financial position for Phato Ltd and its subsidiaries as at 30 September 2019, including relevant calculations for goodwill, non-controlling interest, and asset impairments.

Question

Phato Ltd GH¢ million	Sakara Ltd GH¢ million	Saadi Ltd GH¢ million
Assets:
Non-current assets
Property, plant, and equipment	460.0	150.0
Investment in subsidiaries
Sakara Ltd	365.0
Saadi Ltd	160.0
Investment in Azuri Ltd	24.0
Intangible assets	99.0	15.0
Total Non-current assets	948.0	325.0
Current assets	447.5	240.0
Total assets	1,395.5	565.0
Equity and liabilities:
Equity:
Share capital	460.0	200.0
Other components of equity	36.5	18.5
Retained earnings	447.5	221.0
Total equity	944.0	439.5
Non-current liabilities	247.5	61.5
Current liabilities	204.0	64.0
Total liabilities	451.5	125.5
Total equity and liabilities	1,395.5	565.0

Additional relevant information:

Phato Ltd, on 1 October 2017, acquired 60% of the equity interests of Sakara Ltd. The cost of the investment comprised cash of GH¢360 million. At acquisition, the fair value of the non-controlling interest in Sakara Ltd was estimated at GH¢146 million. The fair value of the identifiable net assets acquired totaled GH¢417.5 million, including retained earnings of GH¢159.5 million and other components of equity at GH¢13.5 million. The excess in fair value results from non-depreciable land.
Sakara Ltd, on 1 October 2018, acquired 70% of Saadi Ltd for GH¢160 million. The fair value of non-controlling interest was estimated at GH¢36 million. The fair value of the identifiable net assets of Saadi Ltd at acquisition was GH¢181 million, retained earnings GH¢53 million, and other components of equity GH¢10 million.
Phato Ltd acquired a 14% interest in Azuri Ltd for GH¢9 million on 1 October 2017. On 1 April 2019, Phato Ltd acquired an additional 16% interest in Azuri Ltd for GH¢13.5 million, achieving significant influence.
Phato Ltd purchased patents for GH¢5 million and incurred other development costs for product development.
Impairment tests were conducted on Sakara Ltd and Saadi Ltd.

Required:
Prepare the consolidated statement of financial position for the Phato Ltd Group as at 30 September 2019.

Answer

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Tags: Business Combinations, Consolidation, Goodwill, IFRS, Impairment, Investment
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: MAY 2020

CR – Nov 2020 – L3 – Q1i – Consolidated Profit or Loss and OCI

Prepare a consolidated statement of profit or loss and other comprehensive income for a parent, foreign subsidiary, and associate, accounting for goodwill impairment, disposal, and foreign currency translation.

Question

	Bolga Ltd	Navrongo Ltd	Serrekunda Ltd
Revenue	GH¢286,000	GH¢136,000	GMD840,000
Cost of sales	(GH¢122,000)	(GH¢84,000)	(GMD504,000)
Gross profit	GH¢164,000	GH¢52,000	GMD336,000
Distribution costs	(GH¢20,000)	(GH¢12,000)	(GMD56,000)
Administrative expenses	(GH¢46,000)	(GH¢20,000)	(GMD116,000)
Operating profit	GH¢98,000	GH¢20,000	GMD164,000
Investment income	GH¢2,000	GH¢4,000	–
Finance costs	(GH¢4,000)	(GH¢8,000)	(GMD12,000)
Profit before tax	GH¢96,000	GH¢16,000	GMD152,000
Income tax expenses	(GH¢22,000)	(GH¢4,000)	(GMD36,000)
Profit for the period	GH¢74,000	GH¢12,000	GMD116,000

On 30 April 2020, it was determined that goodwill arising on the purchase of Serrekunda Ltd was impaired by GMD16 million. Goodwill impairments are charged as administrative expenses.

iii) On 28 February 2020, Navrongo Ltd paid a dividend of GH¢2 million to its ordinary shareholders.

10% bank loan: GH¢28,000
8% loan notes: GH¢12,000

All the interest for the year has been expensed to the statement of profit or loss. None of the loan notes are held by any other companies within Bolga Ltd.

vi) The following exchange rates are relevant:

GMD: GH¢1
- May 1 2019: 10.0
- April 30 2020: 8.0
- Average for the year ended 30 April 2020: 9.2

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income for the year ended 30 April 2020.

Answer

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Tags: Associate, Consolidation, Disposal, Fair Value, Foreign subsidiary, Goodwill, Profit or Loss
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: NOV 2020

CR – May 2021 – L3 – Q1 – Consolidation with Subsidiaries and Associate

Prepare consolidated statement of financial position including two subsidiaries and an associate. Adjust for goodwill, non-controlling interest, and contingent consideration.

Question

Required:
Prepare a consolidated statement of financial position as of 31 May 2020 for the Blavo Group.

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Tags: Associates, Business Combinations, Consolidation, Deferred Tax, Financial Statements, Goodwill, Non-Controlling Interests, Subsidiaries
Level: Level 3

CR – May 2021 – L3 – Q4b – Control Assessment of Tema Ltd

Discuss the control of Accra Ltd over Tema Ltd in accordance with IFRS 10.

Question

Required:
In accordance with IFRS 10: Consolidated Financial Statements, discuss whether Accra Ltd controls Tema Ltd. (5 marks)

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Tags: Consolidation, Control, IFRS 10, Subsidiary
Level: Level 3

Topic: Consolidated Financial Statements
Series: MAY 2021

FR – Nov 2017 – L2 – Q1a – Consolidation of Group Statements

This question tests candidates on preparing a consolidated statement of profit or loss and other comprehensive income for a group, accounting for goodwill, non-controlling interest, intra-group transactions, and fair value adjustments.

Question

Below is the summarised draft financial statements of both companies:

Statement of Profit or Loss and other Comprehensive Income for the year ended September 30, 2017	Higherhigher Limited (N’000)	Lowerlower Limited (N’000)
Revenue	2,720,000	1,344,000
Cost of sales	(2,016,000)	(1,024,000)
Gross profit	704,000	320,000
Distribution costs	(64,000)	(64,000)
Administrative expenses	(192,000)	(102,400)
Finance costs	(9,600)	(12,800)
Profit before tax	438,400	140,800
Income tax expense	(150,400)	(44,800)
Profit for the year	288,000	96,000

Additional information:

The fair value of Lowerlower Limited’s assets was equal to their carrying amounts, except for a plant with a fair value of N64m in excess of the carrying amount, which had a remaining life of five years. Straight-line depreciation was used. Lowerlower has not adjusted the carrying amount of its plant.
Sales from Lowerlower to Higherhigher after the acquisition were N256m, with a 40% mark-up. Higherhigher sold N166.4m of these goods by September 30, 2017.
Lowerlower’s receivables include N19.2m due from Higherhigher, which didn’t agree with Higherhigher’s payables due to cash in transit of N6.4m.
Non-controlling interest is measured at fair value. The fair value of the goodwill attributable to the non-controlling interest is N48m.
Consolidated goodwill was not impaired.

You are required to prepare:

The consolidated statement of profit or loss and other comprehensive income for the year ended September 30, 2017.

Answer

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Tags: consolidated financial statements, Depreciation Adjustment, Goodwill, Intra-Group Sales, Non-Controlling Interest, Profit Adjustment
Level: Level 2

Topic: Consolidated Financial Statements
Series: NOV 2017

FR – May 2018 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated profit or loss and other comprehensive income for Adanna Plc and its subsidiary Ebuka Ltd for the year ended December 31, 2017.

Question

Adanna Plc has a subsidiary, Ebuka Limited. The statement of profit or loss and other comprehensive income for the companies is as follows:

Statement of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2017

	Adanna Plc (N’000)	Ebuka Limited (N’000)
Revenue	986,546	614,206
Cost of Sales	(593,204)	(365,903)
Gross Profit	393,342	248,303
Other Income	57,850	12,420
Distribution Costs	(69,496)	(40,562)
Administrative Expenses	(158,624)	(95,036)
Other Expenses	(32,108)	(15,814)
Finance Costs	(20,600)	(10,220)
Profit Before Tax	170,364	99,091
Income Tax Expense	(51,110)	(26,727)
Profit for the Year	119,254	72,364
Other Comprehensive Income:
Gain on Revaluation	68,166	29,202
Total Comprehensive Income	187,420	101,566

Additional Information:

Adanna Plc acquired 75% of the issued equity shares of Ebuka Limited three years ago. Goodwill on acquisition was N280 million. The recoverable amount of goodwill at the year-end was N268 million, marking the first time the recoverable amount had fallen below the initial recognition.
During the year, Ebuka Limited invoiced goods worth N300 million to Adanna Plc. A quarter of these goods were included in Adanna Plc’s inventory at the year-end. Ebuka Limited invoices goods at cost plus 25%.
Ebuka Limited’s distribution costs include depreciation of an asset subject to a fair value increase of N155 million on acquisition. The asset is being depreciated on a straight-line basis over ten years.
Adanna Plc’s other income includes an intercompany management charge of N10 million to Ebuka Limited, which was recognized as administrative expenses by Ebuka Limited.

Required: Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for Adanna Plc Group for the year ended December 31, 2017.

Answer

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Tags: Consolidation, Financial Reporting, Goodwill, Group Accounts, IFRS 10, Intercompany transactions, Non-Controlling Interest, Profit or Loss, Subsidiary
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2018

FR – May 2019 – L2 – Q1b – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position of Ajakaye Group Ltd, considering fair value adjustments and intra-group transactions.

Question

You are provided with the following statement of financial position for Ajakaye Limited and Ajalorun Limited.

Statement of Financial Position as at 31 March 2019	Ajakaye Ltd (₦’000)	Ajalorun Ltd (₦’000)
Non-current assets
Property, Plant & Equipment	367,500	84,000
Investment	140,000	–
Total non-current assets	507,500	84,000
Current assets
Inventory at cost	154,000	49,000
Trade receivables	101,500	73,500
Bank balance	70,000	–
Total current assets	325,500	122,500
Total assets	833,000	206,500
Equity and liabilities
Ordinary shares at ₦1 each	490,000	119,000
Retained earnings	150,500	35,000
Total equity	640,500	154,000
Current liabilities
Trade payables	192,500	38,500
Bank overdraft	–	14,000
Total current liabilities	192,500	52,500
Total equity and liabilities	833,000	206,500

Additional Information:

Ajakaye Ltd acquired 70% of the issued ordinary share capital of Ajalorun Ltd four years ago, when the retained earnings of Ajalorun were ₦14 million. There has been no impairment of goodwill.
For the purpose of the acquisition, property, plant & equipment with a carrying amount of ₦35 million was revalued to its fair value of ₦42 million. The revaluation was not recorded in the accounts of Ajalorun Ltd. Depreciation is charged at 20% using the straight-line method.
It is the group’s policy to value non-controlling interest at fair value.
The market price of the shares of the non-controlling shareholders just before the acquisition was ₦1.50.
Ajakaye Ltd sells goods to Ajalorun Ltd at a markup of 25%. At 31 March 2019, the inventories of Ajalorun Ltd included ₦31.5 million of goods purchased from Ajakaye Ltd.
Ajalorun Ltd owes Ajakaye Ltd ₦24.5 million for goods purchased, and Ajakaye Ltd owes Ajalorun Ltd ₦10.5 million.

Required:
Prepare the consolidated statement of financial position of Ajakaye Group Ltd as at 31 March 2019.

Answer

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Tags: Consolidation, Goodwill, Group Accounts, Non-Controlling Interest, Statement of Financial Position
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAY 2019

FR – May 2019 – L2 – Q1a – Consolidated Financial Statements (IFRS 10)

Explain the usefulness of consolidated financial statements

Question

Explain why consolidated financial statements are useful to the users of financial statements as opposed to just the parent company’s separate financial statements.

Answer

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Tags: Consolidation, Goodwill, Parent Company, Statement of Financial Position
Level: Level 2