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 – Apr 2022 – L3 – Q1 – Consolidated financial statements, Business combinations and consolidation,

Prepare a consolidated statement of financial position for a group of companies considering complex adjustments for goodwill, impairments, and non-controlling interests.

Question

Below are the statements of financial position for three companies as of 31 July 2021:

Statements of Financial Position as at 31 July 2021	Papa Plc GH¢’million	Mama Plc GH¢’million	Bebe Plc GH¢’million
Non-current assets:
Property, plant, and equipment	3,888	1,680	1,224
Investments	3,560	2,600	200
Total non-current assets	7,448	4,280	1,424
Current assets:
Inventories	1,080	368	300
Trade receivables	1,376	416	100
Cash & bank	368	104	64
Total current assets	2,824	888	464
Total assets	10,272	5,168	1,888
Equity:
Share capital of GH¢1 each	4,000	1,200	640
Revaluation surplus	2,400	960	400
Retained earnings	1,432	800	760
Total equity	7,832	2,960	1,800
Current liabilities:
Trade payables	1,144	1,080	56
Taxation	1,296	1,128	32
Total current liabilities	2,440	2,208	88
Total equity and liabilities	10,272	5,168	1,888

Additional information:

Papa Plc bought 720 million shares in Mama Plc on 1 August 2019 at GH¢2.50 per share in cash. On that date, Mama’s retained earnings were GH¢480 million, and net assets equaled their carrying amounts except for property, plant, and equipment, which had a fair value excess of GH¢320 million.
Papa implements a policy of carrying property, plant, and equipment at fair values across group companies from the date of acquisition.
On 1 August 2020, Mama bought 512 million shares in Bebe Plc. The consideration was GH¢3 per share in cash with an additional payment of GH¢1 per share due on 31 July 2022. The fair value of the contingent consideration was GH¢320 million on 1 August 2020 and GH¢416 million on 31 July 2021. Bebe’s retained earnings were GH¢664 million, and the revaluation surplus was GH¢360 million.
Bebe controls the brand “Y start,” with a fair value of GH¢40 million and a useful life of 20 years. This has not been recognized in the accounts.
Papa uses the fair value method for non-controlling interests, using GH¢2.50 per share for this purpose.
Goodwill impairment loss of GH¢40 million for Mama and GH¢20 million for Bebe was recognized on 31 July 2021.
Mama bought goods from Bebe for GH¢16 million, with 60% unsold at year-end. These goods cost Bebe GH¢12 million.

Required: Prepare the Consolidated Statement of Financial Position for Papa Group as of 31 July 2021, in accordance with IFRS.

Answer

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Tags: Business Combinations, consolidated financial statements, Goodwill, Impairment, Non-Controlling Interests
Level: Level 3

Topic: Business combinations and consolidation, Consolidated Financial Statements
Series: APR 2022

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

This question requires preparing the consolidated statement of financial position for Sankom Group, including adjustments for goodwill impairment and fair value adjustments.

Question

Sankom Ltd (Sankom) in the last three years acquired Makpa and Biiri. The statement of financial position for the three companies as at 31 December 2023 is as follows:

Additional Information:

i) The following information relates to the acquisition of Makpa and Biiri:

Makpa: Date of acquisition: 1 January 2021, Shareholding percentage: 80%, Goodwill arising from the acquisition: GH¢44,800,000
Biiri: Date of acquisition: 30 June 2022, Shareholding percentage: 60%, Goodwill arising from the acquisition: GH¢38,400,000

ii) An upward fair value adjustment of GH¢4,400,000 was required for Makpa’s production machinery with a useful life of five years.

iii) Makpa sold goods to Biiri worth GH¢2,240,000, with a margin of 20%, and 30% of the goods were unsold by Biiri as of 31 December 2023.

iv) No impairment losses were previously recognized, but impairment reviews at 31 December 2023 indicated the recoverable amounts of the net assets of Makpa and Biiri were GH¢133,244,800 and GH¢116,544,000, respectively.

v) Sankom rented a building to Makpa at an annual rental of GH¢2,000,000, which Sankom accounted for as investment property, recognizing a fair value gain of GH¢1,200,000.

Required:
Prepare the consolidated statement of financial position for Sankom Group as at 31 December 2023.

Answer

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Tags: Consolidation, Fair Value Adjustments, Goodwill, Intragroup Transactions, Investment Property, Non-Controlling Interest, Property Plant and Equipment
Level: Level 3

Topic: Consolidated Financial Statements
Series: MAR 2024

CR – Nov 2023 – L3 – Q1 – Consolidated Financial Statements

Preparation of consolidated statement of profit or loss and other comprehensive income including adjustments for NCI, goodwill, and fair value.

Question

Below are the statements of comprehensive income of Agingo Plc (Agingo), Telemo Plc (Telemo), and Zimbo Plc (Zimbo) for the year ended 31 March 2023:

Item	Agingo (GH¢000)	Telemo (GH¢000)	Zimbo (GH¢000)
Revenue	432,840	302,988	259,704
Cost of sales	(194,778)	(136,345)	(116,867)
Gross profit	238,062	166,643	142,837
Operating expenses	(83,322)	(58,325)	(49,993)
Other income	10,821	7,575	6,493
Finance cost	(5,952)	(4,166)	(3,571)
Profit before tax	159,609	111,727	95,766
Tax	(39,902)	(29,927)	(27,134)
Profit for the year	119,707	81,800	68,632
Other comprehensive income	6,493	5,843	–
Total comprehensive income	126,200	87,643	68,632

Additional Information:

Agingo held 15% of the equity shares of Telemo and acquired an additional 45% and 10% of the loan stock during the year.
Fair value adjustments were made for the production machinery of Telemo, which had a useful life of 4 years.
Agingo acquired 70% of Zimbo in 2016.
Intercompany transactions occurred between Telemo and Agingo.
There were shareholding increases and impairments during the year.
Any intercompany dividends were excluded.

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income of Agingo’s group for the year ended 31 March 2023. (All your workings are to be rounded to the nearest thousand).

Answer

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Tags: Consolidation, Deferred Tax, Fair Value, Goodwill, Non-Controlling Interest
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2023

CR – Aug 2022 – L3 – Q4c – Consolidated Financial Statements

This question discusses the consolidation implications of changes in group structure that do not result in a loss of control.

Question

Explain the consolidation implication of a change in group structure that does not result in a loss of control.

Answer

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Tags: Consolidation, Group Accounting, Group Structure, Non-Controlling Interest
Level: Level 3

Topic: Consolidated Financial Statements
Series: AUG 2022

CR – Aug 2022 – L3 – Q1 – Consolidated Financial Statements

This question requires the preparation of a consolidated statement of financial position for Labone Group, considering investments in subsidiaries and intercompany transactions.

Question

Below are the summarised statements of financial position of three entities: Labone Ltd (Labone), Nungua Ltd (Nungua), and Teshie Ltd (Teshie) as at 31 December 2021.

Statements of financial position as at 31 December 2021	Labone	Nungua	Teshie
Assets	GH¢million	GH¢million	GH¢million
Non-current assets
Property, plant, and equipment	1,150	800	400
Investment in Nungua	560	–	–
Investment in Teshie	60	–	–
Other investment	140	–	–
Total non-current assets	1,910	800	400
Current assets	490	200	100
Total assets	2,400	1,000	500
Equity and liabilities
Equity
Equity shares of GH¢1 each	400	320	200
Retained earnings	1,225	440	200
Other reserves	95	–	–
Total equity	1,720	760	400
Non-current liabilities	300	80	40
Current liabilities	380	160	60
Total equity and liabilities	2,400	1,000	500

Additional information:

i) On 1 January 2018, Labone acquired 80% of the equity share capital of Nungua for cash consideration of GH¢560 million. At the same date, Labone acquired 70% of the equity share capital of Teshie for cash consideration. Labone has correctly recorded both transactions. At this time, the balances on the retained earnings, the fair values of non-controlling interests, and fair values of the identifiable net assets of Nungua and Teshie were as follows:

	Nungua	Teshie
Retained earnings	GH¢300 million	GH¢120 million
Fair value of non-controlling interests	GH¢140 million	GH¢80 million
Fair value of net assets	GH¢640 million	GH¢310 million

Any difference between the acquisition date fair value and book value of the identifiable net assets of both investees was due to land. Fair value adjustments should be deemed as temporary differences which are subject to tax of 20%. The fair values of identifiable net assets above are not yet adjusted for tax. Shortly after acquisition, Teshie incorporated the fair values (together with any tax effects) into its separate financial statements, but Nungua had not yet incorporated the fair values into its separate financial statements.

ii) On 1 October 2021, Labone disposed of 40% out of the 70% equity shares of Teshie for GH¢220 million. Labone credited the proceeds received to its “Investment in Teshie” and debited “Cash.” At this time, it was determined that the fair value of the remaining interest was GH¢180 million. Following the sale, Labone could only exert significant influence over Teshie.

iii) During the financial year, Labone transferred goods worth GH¢5 million every month to Teshie. By 31 December 2021, Teshie had not sold the last two months’ deliveries and had included them in its year-end inventory. Labone charges three-seventh (3/7) mark-up on all sales.

iv) Labone’s receivable balance includes GH¢12 million owed by Teshie in respect of the last three months’ sales. This balance agreed with the corresponding payables in Teshie’s financial statements.

v) In its separate financial statements, Labone has accounted for its investments in both Nungua and Teshie at cost. It is the policy of Labone group to measure goodwill in full and to record non-controlling interests at fair value at acquisition. Neither goodwill of Nungua nor that of Teshie has suffered any impairment since acquisition.

vi) Labone has two internal business segments: Construction Division and Merchandise Division. On 1 July 2021, the Construction Division entered into a 1-year fixed price contract to construct an ultra-modern office complex at a contract sum of GH¢60 million for a district government agency located in the Eastern zone of Ghana. Total estimated costs at the time the contract was concluded were GH¢52 million. Actual costs incurred up to 31 December 2021 amounted to GH¢32 million. At 31 December 2021, the Directors of Labone revised its total construction costs on the project to GH¢64 million. No progress payments have been received from the agency. The only entries made have been to include the costs incurred in Labone’s inventory. Labone measures progress to completion on the basis of cost.

vii) During the current year, Nungua and Teshie reported profits after tax of GH¢48 million and GH¢40 million respectively. Unless otherwise stated, it may be assumed that profits accrued evenly over the year and that no dividends were paid during the year.

(Note: Deferred tax adjustment should be ignored, unless otherwise indicated.)

Required:

Prepare the consolidated statement of financial position of the Labone Group as at 31 December 2021.

Answer

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Tags: Acquisition, Consolidation, Financial Position, Group Accounting, Investments, Non-Controlling Interest
Level: Level 3

Topic: Consolidated Financial Statements
Series: AUG 2022

CR – Nov 2019 – L3 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Herd Ltd and its subsidiaries as of 31 March 2019.

Question

The following statements of financial position are as at 31 March 2019:

Assets	Herd Ltd (GH¢m)	Swarm Ltd (GH¢m)	Army Ltd (GH¢m)
Tangible non-current assets	1,280	440	280
Investment in Swarm Ltd	400	–	–
Investment in Army Ltd	60	–	–
Current assets	544	190	130
Total assets	2,284	630	410

Equity and liabilities	Herd Ltd (GH¢m)	Swarm Ltd (GH¢m)	Army Ltd (GH¢m)
Stated capital	950	260	230
Revaluation reserve	90	–	–
Retained earnings	390	210	94
Total equity	1,430	470	324
Non-current liabilities	640	30	16
Current liabilities	214	130	70
Total equity and liabilities	2,284	630	410

Herd Ltd acquired the following shareholdings in Swarm Ltd and Army Ltd:

Company	Date of Acquisition	Holding Acquired	Fair Value of Net Assets (GH¢m)	Purchase Consideration (GH¢m)
Swarm Ltd	1 April 2016	10%	325	30
	1 April 2018	70%	460	370
Army Ltd	1 April 2018	25%	200	60

You are provided with the following additional information relevant to the consolidation:

The carrying value of Swarm Ltd’s net assets at 1 April 2016 was equal to its fair value (GH¢325m).
The fair value of the initial 10% investment in Swarm Ltd at 31 March 2018 was GH¢40m.
Herd Ltd uses the full fair value method for acquisition accounting. The non-controlling interests in Swarm Ltd at 1 April 2018 were valued at GH¢95m.
The fair value of Swarm Ltd’s land was GH¢25m above its carrying value as of 1 April 2018. No change in this value occurred subsequently.
Army Ltd’s land had a fair value excess of GH¢16m over its carrying value as of 1 April 2017.
Goodwill from the acquisition of Swarm Ltd has been impaired by GH¢15m as of 31 March 2019. No impairment has occurred for the Army Ltd investment.
Herd Ltd formed a defined benefit pension scheme and contributed GH¢250m to it, included in receivables as of 31 March 2019. The present value of the pension obligations is GH¢317m, and the fair value of plan assets is GH¢302m.

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

Answer

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Tags: Acquisition Accounting, Consolidated Statement of Financial Position, Goodwill, Non-Controlling Interest, Pension Liability
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2019

CR – Nov 2017 – L3 – Q1 – Consolidated Financial Statements

Preparation of a consolidated statement of financial position with fair value adjustments, goodwill, non-controlling interest, and other consolidation adjustments.

Question

On 1 June 2015, Makola acquired 85% of the ordinary shares of Kejetia when Kejetia’s other reserves were GH¢4 million and retained earnings were GH¢10 million. The fair value of the net assets of Kejetia was GH¢60 million at 1 June 2015. Kejetia acquired 60% of the ordinary shares of Kotokuraba on 1 June 2015 when the other reserves of Kotokuraba were GH¢8 million and retained earnings were GH¢6 million. The fair value of the net assets of Kotokuraba at that date was GH¢39 million. The excess of the fair value over the net assets of Kejetia and Kotokuraba is due to an increase in the value of non-depreciable land of the companies.

Below are the statements of financial position of the three companies as at 31 May 2017:

	Makola (GH¢000)	Kejetia (GH¢000)	Kotokuraba (GH¢000)
Assets
Non-current assets
Property, Plant & Equipment	275,000	20,000	26,000
Investment in Kejetia	60,000	–	–
Investment in Kotokuraba	–	30,000	–
Investment Property	10,000	–	–
Current Assets
Inventory	40,000	23,200	16,000
Trade Receivables	10,000	5,800	4,000
Total Assets	395,000	79,000	46,000
Equity and Liabilities
Ordinary shares	150,000	40,000	20,000
Other reserves	30,000	5,000	8,000
Retained earnings	135,000	25,000	10,000
Total Equity	315,000	70,000	38,000
Non-current liabilities	45,000	2,000	3,000
Bank Overdraft	35,000	7,000	5,000
Total Liabilities	80,000	9,000	8,000
Total Equity and Liabilities	395,000	79,000	46,000

The following information is relevant to the preparation of the group financial statements:

There have been no issues of ordinary shares in the group since 1 June 2015.
Kejetia owns several trade names highly regarded in the market. None have been acquired externally. Makola recognized a GH¢5 million valuation of these trade names in the acquisition, not included in the net assets of Kejetia. Group policy is to amortize intangible assets over 10 years.
On 1 June 2016, Makola sold inventory to Kejetia for GH¢28 million (cost: GH¢23 million). Kejetia sold this inventory for GH¢35 million on 15 July 2017.
Makola issued 24,000 convertible bonds with a nominal interest rate of 6% and a three-year term, repayable at par. Interest is payable annually in arrears, and each bond can be converted into 300 shares of Makola. The market interest rate for similar debt was 8%. The bonds were issued on 1 June 2016 and accounted for in non-current liabilities at face value.
On 31 May 2017, Makola acquired plant worth GH¢6 million in exchange for land valued at GH¢7 million (carrying value GH¢4 million). Makola made a transfer of GH¢4 million in respect of this transaction.
Goodwill has been tested for impairment at 31 May 2016 and 31 May 2017, and no impairment loss occurred. The group values non-controlling interest at its proportionate share of the subsidiary’s identifiable net assets at acquisition.

Required: Prepare the consolidated statement of financial position of the Makola Group as at 31 May 2017 in accordance with International Financial Reporting Standards (IFRS).

Answer

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Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2017

CR – Nov 2016 – L3 – Q1 – Consolidated financial statements

Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended June 30, 2016.

Question

Below are the separate financial statements of Broad Ltd and two investee companies which also operate in the same industry as the investor entity.

Statements of profit or loss and other comprehensive income for the year ended 30 June 2016

The following information is relevant:

On 1 March 2016, Broad Ltd acquired 80% of the equity share capital of Narrow Ltd. The consideration consisted of two elements: a share exchange of three shares in Broad Ltd for every five acquired shares in Narrow Ltd and the issue of a GH¢100 6% loan note for every 500 shares acquired in Narrow Ltd. The share issue has not yet been recorded by Broad Ltd, but the issue of the loan notes has been recorded. At the date of acquisition, shares in Broad Ltd had a market value of GH¢5 each, and the shares of Narrow Ltd had a stock market price of GH¢3.50 each.Broad Ltd had earlier acquired 2.4 million shares in Shadow Ltd on the stock market at a price of GH¢1.50 per share on 1 January 2016.
At the date of acquisition, the fair values of Narrow Ltd.’s assets were equal to their carrying amounts with the exception of its property, which had a fair value of GH¢1.2 million below its carrying amount. This would lead to a reduction of the depreciation charge (in cost of sales) of GH¢50,000 in the post-acquisition period. Narrow Ltd has not incorporated this value change into its separate financial statements.
Broad’s group policy is to revalue all properties to current value at each year-end. On 30 June 2016, the value of Narrow’s property was unchanged from its value at acquisition, but the land element of Broad Ltd.’s property had increased in value by GH¢500,000 as shown in other comprehensive income.
Sales from Narrow Ltd to Broad Ltd throughout the year ended 30 June 2016 were GH¢12 million. Narrow made a mark-up on cost of 25% on these sales. Broad Ltd had GH¢2 million (at cost to Broad Ltd) of inventory that had been supplied in the post-acquisition period by Narrow Ltd as at 30 June 2016.
In June 2016, Broad Ltd sold goods to Shadow Ltd for GH¢2,000,000, thus achieving a profit mark-up of 25%. The entire consignment remained unsold and was included in the inventory of Shadow Ltd as at 30 June 2016.
Broad’s investments include some available-for-sale investments that have increased in value by GH¢300,000 during the year. The other equity reserve relates to these investments and is based on their value as at 30 June 2015. There were no acquisitions or disposals of any of these investments during the year ended 30 June 2016.
Broad’s policy is to value the non-controlling interest at fair value at the date of acquisition. For this purpose, Narrow’s share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest.
It was determined at the year-end that 10% of the goodwill relating to the acquisition of Narrow was impaired.

Required:

a) Prepare the consolidated statement of profit or loss and other comprehensive income for Broad Ltd. Group for the year ended 30 June 2016. (10 marks)

b) Prepare the consolidated statement of financial position for Broad Ltd. Group as at 30 June 2016. (10 marks)

Answer

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Tags: Comprehensive Income, Consolidation, Group Accounting, Profit or Loss
Level: Level 3

Topic: Consolidated Financial Statements
Series: NOV 2016

CR – Mar 2023 – L3 – Q1 – Consolidated Financial Statements

Prepare a consolidated statement of financial position for Abuakwa Group as at 31 December 2021.

Question

Below are statements of financial position of three companies: Abuakwa, Tanoso, and Kwadaso as at 31 December 2021:

Statements of Financial Position as at 31 December 2021

	Abuakwa (GH¢ million)	Tanoso (GH¢ million)	Kwadaso (GH¢ million)
Non-current assets
Tangible assets	358.0	169.5	120.0
Investments	170.0	6.5	–
Total Non-current assets	528.0	176.0	120.0
Current assets	264.0	172.0	116.0
Total assets	792.0	348.0	236.0

Equity and Liabilities

	Abuakwa (GH¢ million)	Tanoso (GH¢ million)	Kwadaso (GH¢ million)
Equity
Share capital – Ordinary shares (GH¢2 each)	180.0	50.0	30.0
Preference shares (GH¢2 each)	–	40.0	13.0
Retained earnings	330.0	66.0	56.0
Other reserves	50.0	23.0	8.0
Total equity	560.0	179.0	107.0
Current liabilities	232.0	169.0	129.0
Total equity and liabilities	792.0	348.0	236.0

Additional Information:

Abuakwa acquired 20 million shares in Tanoso on 1 January 2019. The consideration, which has been correctly accounted for, was settled by Abuakwa issuing its own ordinary shares of 7.5 million. The fair value of non-controlling interest of Tanoso at the date of acquisition was GH¢25 million.
The brand name of Tanoso had a fair value of GH¢2 million with a useful life of 5 years. At 31 December 2021, the brand’s recoverable amount was GH¢1.1 million.
Abuakwa acquired 10.5 million shares in Kwadaso on 31 December 2019. Abuakwa satisfied this consideration by deferring cash payment for a year.
Kwadaso’s net assets were uplifted by GH¢3 million on a non-depreciable land.
Tanoso acquired 1.5 million shares of Kwadaso for immediate cash consideration of GH¢6.5 million.
On 1 January 2021, Tanoso sold machinery to Abuakwa at a 20% profit on cost. Abuakwa depreciates this type of machinery at 10% per annum.
Goodwill in Tanoso was impaired by 10%.
Trade payables in Abuakwa include GH¢7 million due to foreign suppliers, with an unaccounted exchange loss of GH¢2 million.

Required:
Prepare the consolidated statement of financial position as at 31 December 2021 for the Abuakwa Group. (All figures should be stated in nearest GH¢0.1 million).

Answer

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Tags: Acquisition, Consolidation, Goodwill, Group Financial Statements, Non-Controlling Interest
Level: Level 3

Topic: Consolidated Financial Statements
Series: MAR 2023

CR – July 2023 – L3 – Q1 – Consolidated Financial Statements

Prepare the consolidated statement of financial position for Banky Ltd as of February 28, 2023.

Question

The following Statements of Financial Position relate to Banky Ltd (Banky), Zinko Ltd (Zinko), and Tooli Ltd (Tooli):

Statements of Financial Position as at 28 February 2023	Banky	Zinko	Tooli
Assets	GH¢ million	GH¢ million	GH¢ million
Non-current assets	1,500	1,040	960
Deferred tax	–	80	–
Current assets	1,188	584	600
Total assets	2,688	1,704	1,560

Equity and liabilities	Banky	Zinko	Tooli
Equity
Equity shares of GH¢5 each	600	500	500
Other reserves	150	90	60
Retained earnings	976	390	355
Total equity	1,726	980	915
Current liabilities	962	724	645
Total equity and liabilities	2,688	1,704	1,560

Additional Information: i) On 1 March 2022, Banky purchased 80 million equity shares in Zinko through a share exchange of three shares in Banky for every two shares in Zinko. The fair values of each share of Banky and Zinko were GH¢7 and GH¢10.5 respectively at acquisition date. Shares issued by Banky have not yet been recorded in the books.

ii) On acquisition date, Zinko’s retained earnings and other reserves were GH¢230 million and GH¢60 million respectively. Fair value of Zinko’s identifiable net assets was equal to their carrying value except that Zinko had a disclosed contingent liability with a fair value of GH¢8 million at acquisition. Provision in respect of this contingent liability has been recognised by Zinko at GH¢7.2 million as at 28 February 2023.

iii) On the same date Zinko was acquired, Zinko also purchased 60% equity holding in Tooli. The purchase and sale agreement for this transaction provided that Zinko would pay cash amount of GH¢500 million (excluding GH¢2 million consultancy costs which Zinko settled immediately and charged against its other comprehensive income) to the former shareholders of Tooli in two years’ time on condition that Zinko’s sales growth exceeds 20% per annum. The fair value of this consideration was estimated at GH¢450 million at acquisition and GH¢438 million at 28 February 2023. Zinko has not yet recorded this transaction. Both values were deemed as final on the two given dates.

iv) However, the professional valuation of Tooli’s identifiable net assets was not finalised at acquisition so a provisional fair valuation of GH¢845 million for the net assets was applied to arrive at the purchase consideration. The final valuation report which was released on 31 January 2023 showed a revised fair value of GH¢860 million for Tooli’s identifiable net assets. Any fair value adjustment was due to an item of plant whose remaining useful life was 5 years at acquisition. On this date, Tooli’s retained earnings and other reserves were GH¢275 million and GH¢55 million respectively.

v) Banky’s closing inventories include goods sold by Zinko at a margin of 20%. These items were invoiced at GH¢5 million but are currently included in Banky’s inventories at their net realisable value of GH¢4.2 million.

vi) The policy of the group is to measure non-controlling interests using their proportion of the fair value of identifiable net assets. An impairment review carried out revealed that goodwill in Zinko at this year-end had a “gross” recoverable amount of GH¢230 million.

vii) Ignore deferred tax adjustments unless otherwise indicated.

Required: Prepare the Consolidated Statement of Financial Position for Banky Ltd as at 28 February 2023.

(All figures should be approximated to the nearest GH¢0.1 million)

(Total: 20 marks)

Answer

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Tags: Business Combinations, Consolidation, Goodwill, Group Structures, IFRS 3, Non-Controlling Interests
Level: Level 3