Professional Documents
Culture Documents
“The degree of influence exercised by the investor over an investee’s financial and operating
policies determines the basis on which the investee is included in the reporting entity’s
consolidated financial statements. Determining the degree of influence in some cases requires
judgement and some guidance is furnished in the International Financial Reporting Standards
(IFRS) in this respect.’ – Stainbank L & Others: A student guide to international financial reporting.
In the Context of the International Financial Reporting Standards No. 10 (IFRS 10)
a) Define and explain in sufficient details the following terms
i. Control
ii. Significant influence (4 marks)
b) Based solely on the information provided state which, if any, of the companies
presented are under the control of company A Limited. Briefly support each of
your answers. All companies have only one class of equity shares.
You are provided with the following statements of financial position (balance sheets) for Nile Plc
(Nile) and Perch Ltd (Perch):
STATEMENTS OF FINANCIAL POSITION AS AT 31 MARCH 2014
Nile Perch
$'000 $'000 $'000 $'000
Non-current assets, at net book value
Plant 325 70
Fixtures 200 50
525 120
Investment
Shares in Perch at cost 200
Current assets
Inventory at cost 220 70
Receivables 145 105
Bank 100 465 0 175
1190 295
Equity
$1 Ordinary shares 700 170
Retained earnings 215 50
915 220
Current liabilities
Payables 275 55
Bank overdraft 0 275 20 75
1190 295
b) For the purposes of the acquisition, plant in Perch with a book value of $50 000 was
revalued to its fair value of $60 000. The revaluation was not recorded in the
accounts of Perch. Depreciation is charged at 20% using the straight-line method.
c) Nile sells goods to Perch at a mark-up of 25%. At 31 March 2014, the inventories of
Perch included $45 000 of goods purchased from Nile.
d) Perch owes Nile $35 000 for goods purchased and Nile owes Perch $15 000.
e) It is the group's policy to value the non-controlling interest at fair value. The market
price of the shares of the non-controlling shareholders just before the acquisition
was $1.50.
Required:
Prepare the consolidated statement of financial position of Nile as at 31 March 2014. Show all
your workings clearly. (25 marks)
Revenue
(a) Calculate the consolidated goodwill at the date of acquisition of Build. (9 marks)
(b) Prepare the consolidated income statement for Mega for the year ended 30
September 2012 as far as is possible in conformity with IFRS. (20 marks)
(c) The carrying amount of a subsidiary’s leased property will be subject to review as
part of the fair value exercise on acquisition and may be subject to review in subsequent
periods.
Required:
Explain how a fair value increase of a subsidiary’s leased property on acquisition should
be treated in the consolidated financial statements; and how any subsequent increase
in the carrying amount of the leased property might be treated in the consolidated
financial statements. Note: Ignore taxation. (4 marks)
(34 marks)
Consolidated Income Statement for the year ended 30 June 2014 (Extract)
N$’000
Loss from operations (500)
Finance cost (25)
Loss before tax (525)
Income tax expense (30)
Loss for period (555)
Attributable to:
Equity holders of Nambox PLC (575)
Non-Controlling interest 20
(555)
Statement of financial position
Nambox PLC consolidated Zimbox Ltd
30/06/2014 30/06/2013 At
acquisition
N$’000 N$’000 N$’000
ASSETS
Non-current assets
Property, plant and equipment 2,600 2,100 460
Intangibles 150 120 -
2,750 2,220 460
Current assets
Inventories 610 535 140
Trade receivables 490 625 200
Cash and cash equivalents 19 28 40
Total assets 3,869 3,408 840
Current liabilities
Trade payables 508 484 95
Taxation 140 150 46
Total equity and liabilities 3,869 3,408 840
Additional information
i. Nambox PLC issued 450,000 N$1 ordinary shares at a premium of 30c in
addition to paying N$137,000 cash, in consideration for 75% of Zimbox Ltd’s
shares. At the date of acquisition all of Zimbox Ltd’s assets and liabilities were
recorded at their fair values, with the exception of property, plant and equipment
which had a fair value of N$150,000 in excess of its carrying value.
iii. During the year ended 30 June 2014, Nambox PLC made a further issue of
ordinary shares at a premium above nominal value.
iv. An analysis of the property, plant and equipment note in the financial statements
showed that equipment with a carrying value of N$450,000 was sold for
N$360,000. Total depreciation charges for the year on property, plant and
equipment were N$600,000.
REQUIREMENTS:
Prepare a consolidated cash flow statement together with a note reconciling profit/loss
before tax to cash generated from operations for Nambox PLC and its subsidiaries for
the year ended 30 June 2014. (35 marks)
Note: Your answer should be in accordance with IAS 7 Cash Flow Statements, using
the indirect method.
QUESTION 1- Feb 2016
(30 marks)
Apples Ltd (Apples) is a public limited company based in Namibia. It has
shareholdings in two other companies, Tomatoes Ltd (Tomatoes) and Carrots Ltd
(Carrots). Statements of Financial Position are shown below for all three companies as
at 31 December 2015.
Statements of Financial Position as at 31 December 2015
Apples Ltd Tomatoes Carrots Ltd
Ltd
N$ million N$ million N$ million
Non-current assets
Property, plant & equipment 500 145 100
Investments 300 48 5
800 193 105
Current assets
Inventories 180 51 23
Trade receivables 64 24 13
Cash & bank 24 13 8
268 88 44
Total assets 1,068 281 149
Equity:
Equity share capital of N$0.25 each 250 100 40
Share premium 200 80 20
Retained earnings 358 65 61
808 245 121
Non-current liabilities:
6% loan notes 100
Current liabilities:
Trade payables 143 36 18
Dividends proposed 17 --- 10
Total liabilities 260 36 28
Total equity & liabilities 1,068 281 149
ii. Apples bought a 40% holding in the ordinary shares of Carrots on 1 January
2014, when the retained earnings balance in Carrots’ books stood at N$52
million. The consideration consisted of an immediate cash payment of N$50
million. The directors of Apples negotiated the right to appoint 4 directors to
Carrots’ 12-person board as a result of its investment.
iii. The group accounting policy is to value any Non-Controlling Interests (NCI) at their
proportionate share of identifiable net assets at the acquisition date.
iv. On 1 January 2013, certain property held by Tomatoes had a fair value N$20
million in excess of its carrying value. The buildings component of this property,
comprising 75% of the total value, had a useful economic life remaining of 10 years
at the date of acquisition.
v. During the financial year ended 31 December 2015, Tomatoes had sold goods to
Apples amounting to N$60 million. The purchase price included a mark-up of 20%
on cost. Tomatoes’ normal mark-up on goods sold is 60%. Of these goods, one-
quarter remained in the closing inventory of Apples at the reporting date.
vi. Recorded in the books of Apples was an intra-group trade payable of N$20 million
owed to Tomatoes at year-end. However, the books of Tomatoes showed a
balance of N$22 million owed by Apples. It transpired that Tomatoes’ computer
system had automatically charged to Apples’ account interest of N$2 million due
to late payments. It was subsequently agreed that Tomatoes would waive this
interest.
vii. Apples has not accounted for any dividend receivable from its group companies.
Both Apples and Carrots have proposed dividends as shown in current liabilities.
Carrot’s proposed dividend relates entirely to the post- acquisition period. No other
dividends were paid or proposed in the year.
viii. Goodwill was reviewed for impairment at the reporting date, and N$3 million
impairment loss was considered necessary to the goodwill of Tomatoes, a N$1
million impairment loss should be provided for on the investment in Carrots.
ix. All workings may be rounded to the nearest N$ 0.1m.
REQUIRED:
a) Prepare the Consolidated Statement of Financial Position for the Apples group as at
31 December 2015 in accordance with International Financial Reporting Standards
(25 marks)
Note that only workings related to Goodwill computation, Non-controlling interest and
Group retained earnings are required.
[Total: 30 MARKS]