Current assets Inventories Trade receivables Cash

160 170 50 380 968 200 100 568 868 100 968

100 90 40 230 420 80 80 200 360 60 420

180 100 10 290 550 50 30 400 480 70 550

Equity Share capital ($1 ords) Share premium Retained earnings Current liabilities Trade payables You ascertain the following additional information: (1) (2)

The 'investments' in the statement of financial position comprise solely Hever's investment in Spiro ($128,000) and in Aldridge ($90,000). The 48,000 shares in Spiro were acquired when Spiro's retained earnings balance stood at $20,000. The 15,000 shares in Aldridge were acquired when that company had a retained earnings balance of $150,000.

(3)

When Hever acquired its shares in Spiro the fair value of Spiro's net assets equalled their book values with the following exceptions: $'000 Property, plant and equipment 50 higher Inventories 20 lower (sold during 20X4) Depreciation arising on the fair value adjustment to non-current assets since this date is $5,000.

(4) (5) (6)

During the year, Hever sold inventories to Spiro for $16,000, which originally cost Hever $10,000. Three-quarters of these inventories have subsequently been sold by Spiro. No impairment losses on goodwill had been necessary by 31 December 20X4. It is group policy to value non-controlling interests at full (or fair) value. The fair value of the noncontrolling interests at acquisition was $90,000.

Required Produce the consolidated statement of financial position for the Hever group (incorporating the associate). (20 marks)

14 Highveldt
Highveldt, a public listed company, acquired 75% of Samson's ordinary shares on 1 April 20X4. Highveldt paid an immediate $350 per share in cash and agreed to pay a further amount on 1 April 20X5 contingent upon the post-acquisition performance of Samson. At the date of acquisition the fair value of this contingent consideration was assessed at $108 million, but by 31 March 20X5 it had become clear that the amount due would be $116 million (ignore discounting). Highveldt has recorded the cash consideration of $350 per share and provided for the initial estimate of contingent consideration of $108 million.

386

Exam question bank

The summarised statements of financial position of the two companies at 31 March 20X5 are shown below: Highveldt Samson $m $m $m $m Tangible non-current assets (note (i)) 420 320 Development costs (note (iv)) nil 40 Investments (note (ii)) 300 20 720 380 Current assets 133 91 Total assets 853 471 Equity and liabilities Ordinary shares of $1 each Reserves: Share premium Revaluation surplus Retained earnings 1 April 20X4 year to 31 March 20X5 270 80 45 160 190 350 745 Non-current liabilities 10% inter company loan (note (ii)) Current liabilities Total equity and liabilities The following information is relevant: (i) Highveldt has a policy of revaluing land and buildings to fair value. At the date of acquisition Samson's land and buildings had a fair value $20 million higher than their book value and at 31 March 20X5 this had increased by a further $4 million (ignore any additional depreciation). Included in Highveldt's investments is a loan of $60 million made to Samson at the date of acquisition. Interest is payable annually in arrears. Samson paid the interest due for the year on 31 March 20X5, but Highveldt did not receive this until after the year end. Highveldt has not accounted for the accrued interest from Samson. Samson had established a line of products under the brand name of Titanware. Acting on behalf of Highveldt, a firm of specialists, had valued the brand name at a value of $40 million with an estimated life of 10 years as at 1 April 20X4. The brand is not included in Samson's statement of financial position. Samson's development project was completed on 30 September 20X4 at a cost of $50 million. $10 million of this had been amortised by 31 March 20X5. Development costs capitalised by Samson at the date of acquisition were $18 million. Highveldt's directors are of the opinion that Samson's development costs do not meet the criteria in IAS 38 Intangible Assets for recognition as an asset. Samson sold goods to Highveldt during the year at a profit of $6 million. One-third of these goods were still in the inventory of Highveldt at 31 March 20X5. An impairment test at 31 March 20X5 on the consolidated goodwill concluded that it should be written down by $22 million. No other assets were impaired. It is the group policy to value the non-controlling interest at full fair value. At the date of acquisition the directors estimated the fair value of the non-controlling interest to be $74m. nil 108 853 134 76 210 330 60 81 471 80 40 nil

(ii)

(iii)

(iv)

(v) (vi) (vii)

Required (a) Calculate the following figures as they would appear in the consolidated statement of financial position of Highveldt at 31 March 20X5: (i) (ii) (iii) Goodwill Non-controlling interest The following consolidated reserves share premium, revaluation surplus and retained earnings. (8 marks)
Exam question bank

(8 marks) (4 marks)

387