Topic: Consolidated Financial Statements

Search 500 + past questions and counting.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Find Related Questions by Tags, levels, etc.

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

Topic: Consolidated Financial Statements
Series: MAY 2019

FR – Nov 2018 – L2 – SB – Q2b – Consolidated Financial Statements (IFRS 10)

Prepare the consolidated statement of financial position for Anambra Ltd and Omambala Ltd.

Question

Anambra Limited acquired 80% of Omambala Limited’s ordinary shares for N210 million on January 1, 2013. On the acquisition date, the retained earnings of Omambala Limited were N105 million. The fair value of non-controlling interest in Omambala Limited at the date of acquisition was N56 million. The financial statements of the two companies for the year ended December 31, 2017, are as follows:

Anambra Limited:

Item	N’000
Non-current Assets	210,000
Investments	280,000
Current Assets:
Inventories	56,000
Trade and other receivables	42,000
Cash and cash equivalents	7,000
Total Assets	595,000
Share Capital	56,000
Share Premium	14,000
Retained Earnings	206,500
Loan Notes	210,000
Trade Payables	108,500
Total Equity and Liabilities	595,000

Omambala Limited:

Item	N’000
Non-current Assets	157,500
Current Assets:
Inventories	52,500
Trade and other receivables	98,000
Cash and cash equivalents	17,500
Total Assets	325,500
Share Capital	42,000
Share Premium	7,000
Retained Earnings	175,000
Loan Notes	59,500
Trade Payables	42,000
Total Equity and Liabilities	325,500

Additional information:

Anambra Limited sold goods to Omambala Limited for N35 million with a gross profit margin of 25%. As of December 31, 2017, 40% of the goods were still in Omambala Limited’s inventory.
The fair values of Omambala’s net assets are equal to their carrying amounts at the acquisition date, except for land, which was included at a cost of N105 million and had a fair value of N126 million.

Required:
Prepare the consolidated statement of financial position for Anambra Limited group as at December 31, 2017.

Answer

Find Related Questions by Tags, levels, etc.

Tags: consolidated financial statements, Goodwill, Non-Controlling Interest
Level: Level 2

Topic: Consolidated Financial Statements
Series: NOV 2018

FR – Mar/Jul 2020 – L2 – Q3a – Exceptions to Consolidated Financial Statements Under IFRS 10

Explain the exceptions to the requirement for a parent to prepare consolidated financial statements according to IFRS 10.

Question

International Financial Reporting Standards (IFRS 10) – Consolidated Financial Statements states that a parent must prepare consolidated financial statements for the group as a whole.
Required:
Explain the exceptions to this rule according to IFRS 10. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Exceptions to Consolidation, Financial Reporting, Group Accounts, IFRS 10
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAR/JULY 2020

FR – Mar/Jul 2020 – L2 – Q3b – Consolidated Statement of Financial Position for Papa Limited Group

Preparation of consolidated statement of financial position for Papa Limited group as at December 31, 2018.

Question

The following information relates to financial statements included in the annual report of Papa Limited and Mama Limited as at December 31, 2018. Papa Limited acquired 80% of the ordinary shares of Mama Limited for N1,200m on January 1, 2014:

Additional Information:
1. At the date of acquisition, Mama Limited retained earnings were N600m. Non-controlling interest fair value in Mama Limited on the date of acquisition was N320m.
2. Papa Limited sold goods worth N200m to Mama Limited during the year making 25% gross profit margin. 40% of the goods are still included in the inventories of Mama Limited as at December 31, 2018.
3. The fair values of the net assets of Mama Limited at the date of acquisition are the same as their carrying amounts, with the exception of land and buildings. The cost of these land and buildings is N600m, and it was estimated to have a fair value of N720m.
Required:
Prepare the consolidated statement of financial position for the Papa Limited group as at December 31, 2018. (13 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Financial Statements, Goodwill, Group Accounting, IFRS 10
Level: Level 2

Topic: Consolidated Financial Statements
Series: MAR/JULY 2020

CR – May 2018 – L3 – Q1b – Consolidated Financial Statements

Calculate the consolidated gain or loss on disposal of a 60% equity interest and explain accounting for the remaining investment.

Question

On 30 June 2016, Afoko Ltd acquired a 100% interest in Anyidohu Ltd, a public limited company, for a cash consideration of GH¢195 million. Anyidohu’s identifiable net assets were fair valued at GH¢160 million. On 30 November 2017, Afoko disposed of 60% of the equity of Anyidohu when its identifiable net assets were GH¢180 million. Of the increase in net assets, GH¢15 million had been reported in profit or loss, and GH¢5 million had been reported in other comprehensive income as a gain on an available-for-sale financial asset. The sale proceeds were GH¢115 million, and the remaining equity interest was fair-valued at GH¢65 million. Afoko could still exert significant influence after the disposal of the interest.

Required:
Calculate the consolidated gain or loss arising on the disposal of the equity interest in Anyidohu Ltd and explain how the investment in Anyidohu Ltd is accounted for after the disposal of 60% of equity.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Disposal of subsidiary, Financial instruments, Goodwill, IFRS, Significant influence
Level: Level 3

Topic: Consolidated Financial Statements
Series: MAY 2018

CR – May 2018 – L3 – Q1a – Consolidated Financial Statements

Prepare consolidated financial statements for Sawaba Group, including a foreign subsidiary, for the year ended 31 December 2017.

Question

Sawaba Ltd (Sawaba) is a listed entity incorporated in Ghana with the object of producing and selling Designed clothing. The functional and presentation currency of Sawaba is the Ghana cedi (GH¢). In its quest to extend its market outside Ghana, the directors of the company decided to acquire a subsidiary in Nigeria. The corporate name of the investee entity is Enugu Plc (Enugu).

In pursuit to its agenda, Sawaba acquired 4,044,000 of the shares in Enugu for GH¢1,680,000 on 31 December 2014 when Enugu’s retained earnings stood at ₦5,752,000. Enugu operates as an autonomous subsidiary. Its functional currency is the Nigerian Naira (₦). The fair value of the identifiable net assets of Enugu were equivalent to their book values at the acquisition date.

The draft financial statements of Sawaba and its subsidiary, Enugu for 2017 financial year are set out below.

Statements of Profit or Loss and Comprehensive Income for the year ended 31 December 2017

i) Exchange rates moved as follows:
31 December 2014 ₦4.40 = GH¢1.00
31 December 2015 ₦4.16 = GH¢1.00
31 December 2016 ₦4.00 = GH¢1.00
15 May 2017 ₦3.90 = GH¢1.00
31 December 2017 ₦3.60 = GH¢1.00
Average for 2017 ₦3.75 = GH¢1.00

ii) Enugu paid an interim dividend of ₦7,488,000 on 15 May 2017. Sawaba also paid an interim dividend of GH¢1,400,000 on 30 September 2017. No other dividends were paid or declared in 2017.

iii) Assessment of consolidation goodwill for impairment indicated nil impairment in the consolidated financial statements by 31 December 2017. No goodwill impairment had been recognised in the previous years.

iv) Group policy is to measure non-controlling interests at fair value at the acquisition date. The fair value of the non-controlling interests in Enugu was measured at GH¢540,000 on 31 December 2014.

Required:
Prepare the consolidated statements of profit or loss and other comprehensive income, an extract from the statement of changes in equity for income surplus for the year ended 31 December 2017 and the consolidated statement of financial position at 31 December 2017 for Sawaba Group.

Answer

Find Related Questions by Tags, levels, etc.

Topic: Consolidated Financial Statements
Series: MAY 2018

CR – May 2019 – L3 – Q1 – Consolidated financial statements | Business combinations and consolidation

The question requires the preparation of a consolidated statement of profit or loss and other comprehensive income for HO group for the year ended 30 September 2018, including adjustments for intra-group sales, goodwill impairment, and partial disposal of a subsidiary.

Question

On 1 October 2016, HO acquired 60% of the equity interest of Sunyani, a public limited company in Ghana. The purchase consideration is made up of cash of GH¢40 million and the fair value of the identifiable net assets acquired was GH¢55 million at that date. The fair value of the non-controlling interest (NCI) in Sunyani was GH¢22.5 million on 1 October 2016.

HO wishes to use the ‘full goodwill’ method for all acquisitions. The share capital and retained earnings of Sunyani were GH¢12.5 million and GH¢32.5 million respectively, and other components of equity were GH¢3 million at the date of acquisition. The excess of the fair value of the identifiable net assets at acquisition is due to non-depreciable land. Goodwill has been tested for impairment annually and as at 30 September 2017 had reduced in value by 20%. However, at 30 September 2018, the impairment of goodwill had reversed and goodwill was valued at GH¢1 million above its original value. This upward change in value has already been included in the draft financial statements of HO below prior to the preparation of the group accounts.

HO group:

Draft statements of profit or loss and other comprehensive income for the year ended 30 September 2018

	HO (GH¢’000)	Sunyani (GH¢’000)	Kumasi (GH¢’000)
Revenue	200,000	57,500	35,000
Cost of sales	(156,000)	(32,500)	(18,000)
Gross profit	44,000	25,000	17,000
Other income	10,500	3,500	1,000
Administrative costs	(7,500)	(4,500)	(6,000)
Other expenses	(17,500)	(9,500)	(4,000)
Operating profit	29,500	14,500	8,000
Finance costs	(2,500)	(1,500)	(2,000)
Finance income	3,000	2,500	4,000
Profit before tax	30,000	15,500	10,000
Income tax expense	(9,500)	(4,500)	(2,500)
Profit for the year	20,500	11,000	7,500
Other comprehensive income – revaluation surplus	5,000	–	–
Total comprehensive income for year	25,500	11,000	7,500

The following information is relevant:

i) HO disposed of an 8% equity interest in Sunyani on 30 September, 2018 for a cash consideration of GH¢9 million and had accounted for the gain or loss in other income. The carrying value of the net assets of Sunyani Ltd at 30 September, 2018 was GH¢60 million before any adjustments on consolidation. HO accounts for investments in subsidiaries using IFRS 9 financial instruments and has made an election to show gains and losses in other comprehensive income. The carrying value of the investment in Sunyani was GH¢45 million at 30 September 2017 and GH¢47.5 million at 30 September, 2018 before the disposal of the equity interest.

ii) HO acquired 60% of the equity interest of Kumasi Ltd, a limited liability company also in Ghana on 30 September, 2016. The purchase consideration was cash of GH¢35 million. Kumasi’s identifiable net assets were fair valued at GH¢43 million and the non-controlling interest had a fair value of GH¢14 million at that date. On 1 April 2018, HO disposed off a 40% equity interest in Kumasi for a consideration of GH¢25 million. Kumasi’s identifiable net assets were GH¢45 million and the value of the non-controlling interest was GH¢17 million at the date of disposal. The remaining equity interest was fair valued at GH¢20 million. After the disposal, HO exerts significant influence. Any increase in net assets since acquisition has been reported in profit or loss and the carrying value of the investment in Kumasi had not changed since acquisition. Goodwill had been tested for impairment and found that no impairment was required. No entries had been made in the financial statements of HO for this transaction other than for cash received.

iii) HO sold inventory to Sunyani for GH¢6 million at fair value. HO made a loss on the transaction of GH¢1 million and Sunyani still holds GH¢4 million in inventory at the year end.

iv) On 1 October 2016, HO purchased an item of property, plant and equipment for GH¢6 million and this is being depreciated using the straight line basis over 10 years with a nil residual value. At 30 September 2017, the asset was revalued to GH¢6.5 million but at 30 September 2018, the value of the asset had fallen to GH¢3.5 million. HO uses the revaluation model to value its non-current assets. The effect of the revaluation at 30 September 2018 had not been taken into account in total comprehensive income but depreciation for the year had been charged.

v) On 1 October 2016, HO made an award of 4,000 share options to each of its seven directors. The condition attached to the award was that the directors must remain employed by HO for three years. The fair value of each option at the grant date was GH¢100 and the fair value of each option at 30 September 2018 was GH¢110. At 30 September 2017, it was estimated that three directors would leave before the end of three years. Due to an economic downturn, the estimate of directors who were going to leave was revised to one director at 30 September 2018. The expense for the year as regards the share options had not been included in profit or loss for the current year and no director had left by 30 September 2018.

Required:
Prepare a consolidated statement of profit or loss and other comprehensive income for the year ended 30 September 2018 for the HO group.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidated Income Statement, Goodwill, Group Structure, Profit or Loss, Subsidiaries
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: MAY 2019

CR – Nov 2018 – L3 – Q4 – Consolidated Financial Statements

Calculate key financial ratios for TGG and analyze its financial performance and cash flow based on the data provided for the year ended 30 September 2018.

Question

The Gandi Group (TGG) operates in the farming industry and has operated a number of 100% owned subsidiaries for many years. The Gandi group has its operations in the Brong-Ahafo Region of Ghana. Its financial statements for the last two years are shown below.

Additional Information:

TGG has become increasingly worried about two major areas in its business environment: reliance on large supermarkets (which demand long payment terms), and the increase in fuel prices, which raises the cost of distribution.
To address these concerns, TGG purchased 80% of Asida Ltd on 1 October 2017. This was TGG’s first acquisition of a subsidiary without owning 100% of it. Asida Ltd operates two luxury hotels in the Ashanti Region.
TGG raised finance by disposing of GH¢5.5 million in investments (with a GH¢2.25 million gain on disposal, included in administrative expenses) and by taking a GH¢10 million loan.
Asida Ltd opened a third hotel in Accra in March 2018. Initial reviews were poor, but feedback improved after the appointment of a new marketing director in May 2018.
Ratios for the year ended 30 September 2017:
- Gross profit margin: 59.1%
- Operating margin: 8.5%
- Return on capital employed: 7.4%
- Inventory turnover period: 60 days
- Receivables collection period: 83 days

Required: a) Prepare the equivalent ratios for the year ended 30 September 2018.
(5 marks)

b) Analyze the financial performance and cash flow of TGG for the year ended 30 September 2018, making specific reference to any concerns or expectations regarding future periods.
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Analysis, Cash Flow, Consolidation, Financial Ratios, Performance
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2018

CR – Nov 2018 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of financial position for Accra Ltd, considering acquisitions, goodwill, impairments, revaluation, and pension obligations.

Question

Accra Ltd, a public limited liability company in Ghana, operates in the manufacturing sector.

Accra Ltd has investments in two other Ghanaian companies.

The draft statement of financial position as at 31 March 2018 are as follows:

Additional information:

i) On 1 April 2016, Accra Ltd acquired 14% of the equity interest of Takoradi Ltd for a cash consideration of GH¢130 million, and Bawku Ltd acquired 70% of the equity interest of Takoradi Ltd for a cash consideration of GH¢635 million. At 1 April 2016, the identifiable net assets of Takoradi Ltd had a fair value of GH¢495 million, retained earnings were GH¢95 million, and other components of equity were GH¢26 million. At 1 April 2017, the identifiable net assets of Takoradi Ltd had a fair value of GH¢575 million, retained earnings were GH¢120 million, and other components of equity were GH¢35 million. The excess in fair value is due to non-depreciable land. The fair value of the 14% holding of Accra Ltd in Takoradi Ltd, which was classified as fair value through profit or loss, was GH¢140 million at 31 March 2017 and GH¢155 million at 31 March 2018. However, the fair value of Bawku Ltd’s interest in Takoradi Ltd had not changed since acquisition.

ii) On 1 April 2017, Accra Ltd acquired 60% of the equity interests of Bawku Ltd, a public limited liability company in Ghana. The cost of investment comprised cash of GH¢625 million. On 1 April 2017, the fair value of the identifiable net assets acquired was GH¢975 million, retained earnings of Bawku Ltd were GH¢325 million, and other components of equity were GH¢27.5 million. The excess in fair value is due to non-depreciable land. It is the group’s policy to measure the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary’s net assets.

iii) Goodwill of Bawku Ltd and Takoradi Ltd were tested for impairment at 31 March 2018 and found that there was no impairment relating to Takoradi Ltd. However, the goodwill of Bawku Ltd was fully impaired by the reporting date.

iv) On 1 April 2016, Accra Ltd acquired office accommodation at a cost of GH¢45 million with a 30-year estimated useful life. During the year, the property market in the area slumped, and the fair value of accommodation fell to GH¢37.5 million at 31 March 2017, which was reflected in the financial statements. However, the market unexpectedly recovered quickly due to the announcement of major government investment in the area’s transport infrastructure. On 31 March 2018, the valuer advised Accra Ltd that the offices should now be valued at GH¢52.5 million. Accra Ltd has charged depreciation for the year but has not taken account of the upward valuation of the offices. Accra Ltd uses the revaluation model and records any valuation change when advised to do so.

v) Accra Ltd has announced two major restructuring plans during the year. The first plan is to reduce its capacity by the closure of some of its smaller factories, which have already been identified. This will lead to the redundancy of 500 employees, who have all individually been selected and communicated to. The costs of this plan are GH¢4.5 million in redundancy costs, GH¢2.5 million in retraining costs, and GH¢2.5 million in lease termination costs. The second plan is to re-organize the finance and information technology department over a one-year period but it does not commence until two years’ time. The plan will result in 20% of finance staff losing their jobs during the restructuring. The costs of this plan are GH¢5 million in redundancy costs, GH¢3 million in retraining costs, and GH¢3.5 million in equipment lease termination costs. There are no entries made in the financial statements for the above plans.

vi) The following information relates to the group pension plan of Accra Ltd:

	1 April 2017 GH¢ million	31 March 2018 GH¢ million
Fair value of plan assets	14	14.5
Actuarial value of defined benefit obligation	15	17.5

The contributions for the period received by the fund were GH¢1 million, and the employee benefits paid in the year amounted to GH¢1.5 million. The discount rate to be used in any calculation is 5%. The current service cost for the period based on actuarial calculations is GH¢0.5 million. The above figures have not been taken into account for the year ended 31 March 2018 except for the contributions paid, which have been entered in cash and the defined benefit obligation.

Required:
Prepare the group consolidated statement of financial position of Accra Ltd as at 31 March 2018.
(Total: 20 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation, Goodwill, Group Financial Statements, Non-Controlling Interest, Pension Plan, Property Plant and Equipment (PPE), Restructuring costs
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2018

CR – Nov 2021 – L3 – Q4b – Consolidated Financial Statements

Explain the disclosure requirements for a parent company that is exempt from preparing consolidated financial statements and elects to prepare separate financial statements under IFRS 10.

Question

What are the disclosure requirements of a parent company that is exempt from preparing consolidated financial statements and elects not to do so and instead prepares separate financial statements?

Answer

Find Related Questions by Tags, levels, etc.

Tags: Consolidation Exemption, Disclosure Requirements, IFRS 10, Parent Company, Separate Financial Statements
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2021

CR – Nov 2021 – L3 – Q1 – Consolidated Financial Statements

Prepare consolidated financial statements for Rafco Group including an income statement and a statement of financial position as of December 31, 2020, incorporating intragroup transactions, intergroup sales, and impairment adjustments.

Question

On 1 January 2016, Rafco Ltd acquired 4,500,000 GH¢1 ordinary shares of Namco Ltd for GH¢12,000,000. The balance on Namco Ltd retained earnings as at this date was GH¢2,350,000. On 1 January 2018, Namco Ltd acquired 2,560,000 GH¢1 ordinary share of Tedco Ltd for GH¢6,000,000 when Tedco Ltd retained earnings as at that date was GH¢1,600,000.

The Financial Statements of Rafco Ltd, Namco Ltd, and Tedco Ltd for the year ended 31 December 2020 are as follows:

Additional Information:

It is the group’s policy to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interest in Namco Ltd on 1 January 2016 was GH¢800,000. The fair value of the non-controlling interest in Tedco Ltd on 1 January 2018 was GH¢1,440,000.
In 2020, Tedco Ltd made intragroup sales to Namco Ltd for GH¢768,000, making a profit of 25% on cost, and GH¢120,000 of these goods were in inventory as at 31 December 2020.
Namco Ltd also made intragroup sales to Rafco Ltd for GH¢416,000, making a profit of 33 1/3% on cost, and GH¢96,000 of these goods were in inventory as at 31 December 2020.
On 1 January 2020, Rafco Ltd sold a group of machines to Namco Ltd at their agreed fair value of GH¢3 million. The carrying amount of the machines was GH¢2 million. The estimated remaining useful life of the machines at the date of the sale was four years.
An impairment test at 31 December 2020 on the consolidated goodwill of Namco Ltd and Tedco Ltd concluded that it should be written down by GH¢150,000 and GH¢100,000, respectively. No other assets were impaired.

Required: Prepare for the Rafco Group a Consolidated Income Statement for the year ended 31 December 2020 and a Consolidated Statement of Financial Position as at that date.

Answer

Find Related Questions by Tags, levels, etc.