Chapter-11 (Working Example)

Himel ltd
The following draft statement of finnancial position has been prepared for the himel ltd.
the himel ltd acquired 80%subsidiary glass ltd on 30 sep 2014.
Himel ltd draft consolidated statement of financial position at 31 march 2015

Particulars tk ,000 tk,000

Non current asset
property ,plant and equipment 3000
goodwill 150
other intangible 450
3600
Current asset
inventories 1300
trade and recieivables 1350
cash and equivalent 900 3350
Total assets 7150

Equity and liabilities

ordinary share capital 2500
share premium account 600
revaluation surplus 450
retain earnings 1800
non controlling interest 300
Total equity 5650
Non current liabilities
provision for restructing cost 50
Current liabilities
trade and other payable 1450
Total equity and liabilities 7150

A number of issues may have not been taken into account in preparing the draft consolidated
financial statement.
1.other intangible include tk 285000 begging goodwill in the books of glass ltd which arose on the acquisition
of an unicorporated business some years ago.the carrying amount of thiss goodwill at the date when himel
ltd acquired glass ltd was tk 350000.it has been amortized in the book of glass ltd
2.freehold land held by glass ltd at the acqusition date had a carrying amount of tk >200000. the market
value of the land at that date was tk 683000.
3. at the acquisition date glass ltd disclosed a contingent liability as a potential tk 350000 although its fair
value as assesed at tk 60000. a final decision on this matter is expected to be reached by the end of 2015
4. at the acquisition date the director of himel ltd intended to restructed and recognize glass ltd and have
provided for restructuring costs of tk 80000.
5. glass ltd sells parts of its output to payne ltd included in the inventories of himel ltd are goods valued at tk
200000 purchased from glass ltd. since acquisition at costs to glass ltd plus 25%.
6.payne ltd measure non controlling interest at acquisition at fair value based on share price.NCI in the draft
statement of financial position has been calculated as fair value at acquistion date plus 20% of the post
acqusition retain earning of glass ltd .no adjustment have been made for 1 to 5 above
 Chapter-11 (Working Example)
Himel ltd
Himel ltd consolidated statement of financial position at 31 march 2015

Particulars tk ,000 tk,000

Non current asset
property ,plant and equipment (3000+(650-200)) 3450
goodwill 110
other intangible(450-285) 165
0
Current asset
inventories 1260
trade and recieivables 1350
cash and equivalent 900 3510
Total assets 7235

Equity and liabilities

ordinary share capital 2500
share premium account 600
revaluation surplus 450
retain earnings(w 2) 1900
non controlling interest(w 3) 305
Total equity 0
non current liabilities
accrued contingent liabilities 60
current liabilities
trade and other payable 1450
Total equity and liabilities 7235

workings

1.goodwill
particular tk.000
per draft 150
goodwill in subsidiary 350
fair value adjustment on land (650-200) -450
contingent liabilities recognized 60
110

2.retained earnings tk,000

per draft 1800
add back restructing cost 52
add back share of subsidiaries goodwill impairment 80

deduct share of purp(40(w4)80% -32

1900
3.non controlling interest
per draft 300
add back share of subsidiaries goodwill impairment

(350-285)20% 13
deduct share of purp 40(w4)20% -8
305

4.PURP
particulars % tk,000
share price 125 200
cost -100 -160
gross profit 25 40

5.non amortization of goodwill

current period profits have been reduced by the amortization of goodwill on acquisition of an
unicorporated business measured at tk 350000 acqusition less tk 285000 carrying amount .
This goodwill is not identifiable ,so it should not be recognized as an asset .nor should any amortization
be recognized as an expense .current period profit should be increased by tk 65000 tk .
 Chapter-14 (Interactive Question 2)
SRH Group ltd
SRH Group Ltd has a number of subsidiaries , one of which, Jocky Ltd, was sold in the current year.The draft
accounts for the SRH Group (being SRH Group Ltd and the subsidiaries it still owns) and Jocky Ltd at March
31, 2018 are as follows:

Statements of financial position

Srh Group Jocky Ltd
Particulars
Cum Cum
Intangibles- goodwill 10000
Investment in Jocky Ltd Ltd at cost 8600
Sundry assets 106125 23750
124725 23750

Equity attributable to owners of parent:

Share capital 20000
Retained earnings 27500
47500 7500
Non-controlling interest 30000 8750
Total equity 77500 16250
Liabilities 25000 7500
Sales proceeds account 22225
124725 23750

Statements of profit or loss

Srh Group Jocky Ltd
Particulars
Cum Cum
profit before tax 32375 9500
Income tax expense (13500) (5375)
Profit for the year 18875 4125
Profit attributable to:
Owners of SRH Group 12625
Non-controlling interest 6250
18875

Statements of changes in equity

SRH Group Jocky Ltd
Attributable to owners of SRH Group Ltd
Non
Share Retained controlling Retained
capital Earnings Total interest Total Earnings
CUm CUm CUm CUm CUm CUm
Balance b/f 20000 14875 34875 23750 58625 4625
Total comprehensive 12625 12625 6250 18875 4125
income for the year
Balance c/f 20000 27500 47500 30000 77500 8750
SRH Group acquired 90% of Jocky Ltd when the retained earnings of Jocky Ltd were £1750 million. In
an earlier accounting period an impairment loss of £50 million was recognized in relation to the
goodwill acquired in the business combination with Jocky Ltd.
On 31 December 2017 SRH Group sold all its shares in Jocky Ltd for £22225 million. SRH Group has
debited cash and credited a sales proceeds account in the statement of financial position with this
amount, as it is unsure what entries are needed.

Requirement
Prepare the Daring Group consolidated statement of financial position, consolidated statement of
profit or loss and consolidated statement of changes in equity for the year ended 31 March 2018.
You should assume that the disposal of Jocky Ltd constitutes a discontinued operation in
accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

Chapter-14 (Interactive Question)

SRH Group ltd
Consolidated statement of financial position at 31 March 2018

Continuing operations
Profit before tax (W2) 32375
Income tax expense (W2) (13500)
Profit for the year from continuing operations 18875
Discontinued operations
Profit for the year from discontinued operations (3095 (W4) + 8303(W5)) 11398
Profit for the year 30273
Profit attributable to:
Owners of SRH Group 23713
Non-controlling interest (6250 other subsidiaries + 310 (W3)) 6560
30273
Cum
Continuing operations
Profit before tax (W2) 32375
Income tax expense (W2) (13500)
Profit for the year from continuing operations 18875
Discontinued operations
Profit for the year from discontinued operations (3095 (W4) + 8303(W5)) 11398
Profit for the year 30273
Profit attributable to:
Owners of SRH Group 23713
Non-controlling interest (6250 other subsidiaries + 310 (W3)) 6560
30273
 Consolidated statement of changes in equity for the year ended 31 March 2018
Attributable to owners of SRH Group Ltd
Share Retained
Total NCI Total
capital Earnings
CUm CUm CUm CUm CUm
Balance b/f 20000 17413 37413 24963 62376
Total comprehensive income for the year 23712 23712 6560 30272
Eliminated on disposal of subsidiary (W5) (1523) (1523)
Balance c/f 20000 41125 61125 30000 91125

WORKINGS
(1) Group structure
SRH Group

90% for 9/12 of year

Jocky Ltd
(2) Consolidation schedule for CSPL
Srh Group Consol
CUm CUm
Profit before tax 32375 32375
Tax (13500) (13500)

(3) Non-controlling interest in Jocky Ltd for CSPL

CUm
3095 (W4) *10% 310

(4) Profit of Jocky Ltd for year to disposal

CUm
Profit After Tax 4125*9/12 3095
3095

(5) Profit on disposal of Jocky Ltd for CSPL

CUm CUm
Sales proceeds 22225
Less: Carrying amount of goodwill at date of disposal:
Consideration transferred 8600
Non-controlling interest at acquisition (9250*10%) 925
Less net assets at acquisition (7500+1750) (9250)
Goodwill at acquisition 275
Less impairment to date (50)
(225)
Less carrying amount of net assets at disposal (W6) (15220)
Add back NCI in net assets at date of disposal (15220 *10%) 1523
Profit on disposal 8303
(6) Net assets at disposal
CUm
Share capital 7500
Retained earnings b/f 4625
Profit for year to disposal (W4) 3095
15220

(7) Group retained earnings b/f for CSCE

CUm
SRH Groupx Group 14875
Jocky Ltd Ltd (90% * (4625-1750)) 2588
Goodwill impairment to date (50)
17413

(8) Non-controlling interest b/f for CSCE

CUm
Jocky Ltd Ltd ((7500+ 4625) * 10%) = 1213 + other subsidiaries 23750 24963
 Chapter-12 (Question)
Robin ltd
The following draft statements of profit or loss and extracts from the statements of changes in equity were
prepared for the year ended 31 March 20X9.

Robins Pathos
Statements of profit or loss
Ltd CU Ltd CU
Revenue 303,600 217,700
Cost of sales -143,800 -102,200
Gross profit 159,800 115,500
Operating costs -71,200 -51,300
Profit from operations 88,600 64,200
Investment income 2,800 1,200
Profit before tax 91,400 65,400
Income tax expense -46,200 -32,600
Profit for the year 45,200 32,800

General Retained General Retained

Statements of changes in equity (extracts)
reserve earnings reserve earnings
CU CU CU CU
Balance brought forward - 79,300 - 38,650
Total comprehensive income for the year - 45,200 - 32,800
Transfer between reserves 15,000 -15,000 5,000 -5,000
Dividends paid on ordinary shares -30,000
Balance carried forward 15,000 79,500 5,000 66450

On 30 November 20X8 Ethos Ltd acquired 75% of the issued ordinary capital of Pathos Ltd for CU130,000.
Pathos Ltd has in issue 100,000 CU1 ordinary shares. Robins Ltd has 500,000 CU1 ordinary shares in issue.
Robins Ltd measures non-controlling interest at fair value. The fair value of the non- controlling interest in
Pathos Ltd at the date of acquisition was CU42,000.
Profits of both companies accrue evenly over the year
Requirements:
(a) Prepare the consolidated statement of profit or loss and consolidated statement of changes in equity for
the year ended 31 March 20X9.
(b) Explain why only four months of Pathos Ltd's profit or loss should be included in the consolidated
statement of profit or loss.
(a) consolidated statement of profit and loss for the year ended 31 march 20x9
CU
revenue (w2) 376167
cost of sale (w2) -177867
gross profit 198300
operating cost (w2) -88300
profit from operation 110000
investment income 3200
profit before tax 113200
income tax expense (w2) -57067
profit for the year 56133
profit attribution to owners of 53400
non-controling interest (w3) 2733
56133
consolidated statement of change in equity for the year ended 31march 20x9
attribution to owner
ordinary non-
general
share reatin total controling total
reserve
capital erning CU CU interest CU
CU
CU CU
balance brought forward 500000
total 0 - 79300 579300 - 579300
comprehensive income for the year - - 53400 53400 2733 56133
transfer between reserves (w4) - 16250 -16250 - - -
added on acquisition of subsidary - - - - 42000 -42000
dividend paid on ordinary share - - -30000 -30000 - -30000
balance carried forward 500000 16250 86450 602700 44733 647433

(2) consolidated schedule

… … adj. consol
CU CU CU CU
revenue 303600 72566 - 376167
c of s -143800 -34067 - -177867
op cost -71200 -17100 -88300
inv income 2800 400 3200
income tax -46200 -10867 -57067
PAT 10867

(3) non-controling interest in profit for the year

cu
25% *10933 (w2) 2733
(4) transfer to general reserve
cu
….. 15000
75% 5000 4/12 1250
16250

Chapter-14 (Question - Self Test 04)

P Ltd. is a holding company with a number of subsidiaries. The consolidation for the year ended 31
December 20X8 has been carried out to include all subsidiaries except S Ltd..S Ltd. has been 80% owned by P
Ltd. since 20X2, at which S Ltd.'s retained earnings amounted to CU75,000, but on 30 June 20X8 P Ltd. sold
all of its shares in S Ltd.

Details are as follows: CU

Cost of original investment(120000 out of 150000 CU1 ordinary shares) 225000
Goodwill acquired in the business combination fully recognized as an expense
as a result of impairment reviews 45000
Sales proceeds 750000
Because P Ltd. is unsure how to deal with its investment in S Ltd. in the 20X8
consolidation, it has not yet consolidated S Ltd. into the group financial statements.

Statements of profit or loss for the year ended 31 December 20X8 are set out below.
P Ltd S Ltd
CU CU
Profit from operations 1313250 488400
Sales proceeds on disposal of S Ltd. 750000 0
profit before tax 2063250 488400
Income tax expense (607500) (153750)
Profit for the year 1455750 334650
Profit attributable to:
Owners of Parable plc 1305450
Non-controlling interest 150300
1455750
The P Ltd. group and S Ltd. had retained earnings brought forward of CU2889450 and CU489600
respectively. Other non controlling interests brought forward were CU761250.
Requirements
Prepare the consolidated statement of profit or loss and the retained earnings and non controlling interest
columns for the statement of changes in equity for the P Ltd. group for the year ended 31 December 20X8 in
so far as the information is available.
 Chapter-14 (Answer - Self Test 04)

P Ltd.
Consolidated statement of profit or loss for the year ended 31 December 20X8
Cum
Continuing operations
Profit before tax 1313250
Income tax expense (607500)
Profit for the year from continuing operations 705750
Discontinued operations
Profit for the year from discontinued operations (167325 (W2) + 104460(W3)) 271785
Profit for the year 977535
Profit attributable to:
Owners of P Ltd. 793770
Non-controlling interest (w4) 183765
977535

Consolidated statement of changes in equity for the year ended 31 December 20X8
Attributable to owners of P Ltd.
Non
Retained controlling
Earnings interest
CU CU
Balance b/f (W5 and W6) 3176130 889170
Total comprehensive income for the year 793770 183765
Eliminated on disposal of subsidiary (W3) 0 (161385)
Balance c/f 3969900 911550

WORKINGS
(1) Group structure
P Ltd.

80% (sold 30 june 20X8: 6/12m)

S Ltd.

(2) Profit for year to disposal

CU
Profit After Tax of S Ltd 334650*6/12 167325
167325
(3) Profit on disposal of Operation
 CU CU
Sales proceeds 750000
Less: net assets at disposal:
Net assets at 1 january 20X8 (150000+489600) 639600
Profit to 30 June 20X8 (W2) 167325
(806925)
Add back NCI in net assets(806925 *20%) 161385
Profit on disposal 104460

(4) Non-controlling interest for year

CU
S Ltd..(167325(W2)*20%) 33465
Other 150300
183765
(5) Retained earnings b/f
CU
P Ltd. 2889450
Add: S Ltd (80% * (489600-75000)) 414600
Less: Goodwill impairment to date (45000)
3259050

(6) Non-controlling interest b/f

CU
S Ltd ((150000 + 489600) * 20%) 127920
other 761250
889170
 Chapter-14 (Question - Worked Example)

Ben ltd. bought 80% of the share capital of Bill Ltd for CU1,900,000 on 1 October 20X1. At that
date Bill Ltd's retained earnings stood at 1,020,000
Ben Ltd has several other subsidiaries, which are wholly owned.
The satements of financial position at 30 September 20X8 and the summarised statements of
profit or loss to that date are given below:

Statement of financial position Ben ltd Bill ltd

Group
CU'000 CU'000
Property, plant and equipment 4,100 1,200
Investment in Bill Ltd 1,900
Current assets 5,400 2,600
11,400 3,800

Share capital (CUI ordinary shares) 4,000 600

Retained earnings 5,000 2,200
9,000 2,800

Current liabilities 2,400 1,000

11,400 3,800

Statement of profit or loss CU'000 CU'000

Profit before interest and tax 2,800 360
Income tax expense -800 -100
Profit for the year 2,000 260

Statement of changes in equity (extract) CU'000 CU'000

Retained earnings at 1 October 20X7 3,000 1,940

Total comprehensive income for the year 2,000 260
Retained earnings at 30 September 20X8 5,000 2200

To date no impairment losses on goodwill have been recognised. The Ben Ltd group figures
exclude any amounts for Bill Ltd. No entries have been made in the accounts for the disposal
described below.
Requirement

Prepare the consolidated statement of financial position, consolidated statement of profit or loss
and consolidated statement of changes in equity extracts for retained earnings and non controling
controlling
interest at 30 September 20X8 on the basis that Ben Ltd sells its entire holding in Bill
Ltd for CU4,200,000 on 30 September 20X8.

You should assume that the disposal is a discontinued operation in accordance with IFRS 5 Non-
current Assets held for sale and discontinued operations.

Chapter-14 (Answer - Worked Example)

Ben and Bill

Consolidated statement of financial position as at 30 September 20x8
CU000
Property, plant and equipment 4,100
Current assets (5,400 + 4,200 disposal proceeds) 9,600
13,700

Share capital 4,000

Retained Earnings(W-4) 7,300
11,300
Current liabilities 2,400
13,700

Consolidated statement of profit or loss for the year ended 30 September 20X8
CU000
Continuing operations
Profit before tax 2,800
Income tax expense -800
Profit for the year from continuing operations 2,000
Discontinued operations
Profit for the year from discontinued operations (1,356 (W2) + 260 (W1)) 1,616
Profit for the year 3,616
Profit attributable to:
Owners of Ben Ltd (B) 3,564
Non-controlling interest (20% x 260) 52
3,616

Consolidated statement of changes in equity (extract)

Ben Ltd Non-controlling
Retained interest
earnings (Bill Ltd)
CU 000 CU000
Balance at 1 October 20x7 (W3+ W5) 3,736 508
Total comprehensive income for the year 3,564 52
Eliminated on disposal of subsidiary (W2) -560
Balance at 30 September 20X8 (W4) 7,300 nil
WORKINGS
(1) Profit of Bill Ltd for year to disposal
CU000
PAT 260
x12/12 260

(2) Profit on disposal of Bill Ltd

CU'000 CU'000
Sales proceeds 4,200
Less: Carrying amount of goodwill at date of disposal
Consideration transferred 1,900
NCI at acquisition (20% (600 + 1,020)) 324
Less: Net assets at acquisition -1,620
-604

Less: Carrying amount of net assets at date of disposal -2,800

Add back: NCI in net assets at date of disposal (20% x 2,800) 560
Profit on disposal 1,356

(3) Retained earnings brought forward CU'000

Ben Ltd 3,000
Bill Ltd (80% (1,940 - 1,020)) 736
3,736

(4) Retained earnings carried forward CU'000

Ben Ltd 5,000
Profit on disposal (4,200 - 1,900 (see Point to note below)) 2,300
7300

(5) NCI b/f CU'000

Share capital 600
Retained earnings b/f 1,940
2,540
x20% 508

Point to note:

The profit on disposal figure in the retained earnings carried forward balance is the profit which
would appear in Ben Ltd's own statement of profit or loss.

This adjustment is required as Ben Ltd's own financial statements do not reflect the disposal. (We
are told that no entries have been made in respect of this transaction.)
 Chapter-12 (Question - 2)

the following are extracts from the financial statement for the year ended 30 june of "A" ltd. And "B" ltd.

Particulars A ltd B ltd.

tk tk
Profit from operation 200000 100000
Divident from B Ltd. 25000 0
profit before tax 225000 100000
Income tax expense 72000 32000
Profit for the year 153000 68000
Dividends paid 25000 35000
share capital(tk 1 shares) 220000 55000

X ltd purchase 54000 shares Y ltd some years ago .X ltds retained
earnings at 1 july 2017 were 280000.
Requirement :
1.Prepare the consolidated statement of profit or loss.
2.The consolidated statement changes in equity for X LTD for
the year ended 2018, as far as the information permit
 Chapter-12 (Answer - Question 2)

Solution
1 CU
Profit from operation 300000
(-) Income tax expense -104000
Profit for the year 196000
Profit attributable to owners
Owners of A ltd. 182400
Non controlling interest 13600
196000

2
Attributable to owners of A ltd.
Particulars Share Retained
Total NCI Total
Capital Earnings
Balance 220000 280000 500000 11000 511000
comprehensive income for the year 0 182400 182400 13600 196000
Dividends 0 -25000 -25000 -7000 -32000
220000 437400 657400 17600 675000
 Chapter-13 (Question - 1)

Beximco Group has a number of wholly-owned subsidiaries and a 50% interest in City Group Ltd,
an entity set up and controlled jointly with a third party.
Beximco City
Particulars
Group Group
TK’000 TK’000
Non-current asset:
Property, plant & equipment 203 80
Investment in City Group 5 0
208 80
Current Assets:
Inventories 50 25
Others 100 55
358 140
Equity:
Share capital 100 10
Retained Earnings 183 90
283 100

Current Liabilities: 75 60
358 160

Their respective statements of profit or loss for the year ended 31 December 2013 are as follows:
Beximco City
Particulars
Group Group
TK’000 TK’000
Revenue 245 156
Cost of sales & expenses -140 -100
Dividend from Kazi & Kazi Ltd 10 0
Profit before tax 115 56
Income tax expenses -50 -16

Profit of the year 65 40

Dividend recognized in the statement of changes in equity

30 20

During 31 December 2013 Beximco Group transferred goods to Cityi Group for TK’25000. Beximco Group
sells goods at a mark-up of 25%. City group has not paid Beximco invoice or sold any of the goods to thirds
parties by the year end.No dividends from City Group are outstanding in Beximco books.

REQUIREMENT:
Prepare a consolidated statement of financial position and statement of profit loss for Beximco Group and
its joint venture as at 31 December 2013 using equity accounting.

Chapter-13 (Answer - 1)

Beximco Group
Consolidated Statement of financial position as at 31 December 2013
SL.N Particulars Amount TK'000
1 Non-Current Assets:
2 property, plant & equipment 203
3 Investment in joint venture(W-4) 47.5
4 250.5
5 Current assets:
6 Inventories 50
7 others 100
8 Total Assets 400.5
9
10 Equity Attributable to owners of the parent:
11 Share capital 100
12 Retained earnings(W-2) 225.5
13 325.5
14 Current liabilities: 75
400.5

Consolidated statement of profit or loss

For The Year ended 31 December 2013
SL.N Particulars Amount TK'000
1 Revenue 245
2 Cost sale and expenses(140+2.5W3) -142.5
3 Share of profit of joint venture (40*50%) 20
4 Profit before tax 122.5
 5 Income tax expenses -50
6 Profit for the year 72.5
7
8 Profit attributable to:
9 Owners of the parent 72.5
10 Non controlling interest 0
72.5

Working-1: Group structure-

Beximco Group

50%

City Group

Working-2: Consolidated retained earnings-

Beximco City
Particulars Group Group
Per Question 183 90
PURP(W-3) -2.5 0
Pre-acquisition retained earnings 0 0
90

Group share of post acquisition earnings Beximco Group (90*50%) 45

225.5

Working-3: Provision for unrealised profit on inventories

Investor's share of unrealised profit in inventories CU25000(25%/125%)50% CU25000
DR cost of sale & retained earnings CU25000
CR investment in city Group CU25000

Working 4:City Group

Cost of joint venture 5
ADD:Post-acqisition retained reserve (W-2) 45
LESS:PURP(W-3) -2.5 47.5

Chapter-13 (Question - Self Test 11)

Monju LTD
Monju Ltd acquired shares in two other companies as follows.

Company Acquisition date Shares acquired Goodwill on Retained earnings at

% CU CU
Prawn Ltd 1 October 20*7 80 135,000 390,000
Madras Ltd 31 December 20*5 25 - 510,000

The result and changes in retained earnings of the three companies for the year
ended 30 September 20*9 as follows.
Monju Madras
Prawn Ltd
Ltd Ltd
CU’000 CU’000 CU’000
Revenue 1200 645 900
Dividend from prawn Ltd 60
Dividend from Madras Ltd 15
Cost of sales and expenses -825 -382.5 -660
Profit before tax 450 262.5 240
Income tax expense -120 -67.5 -90
Profit for the year 330 195 150

Retained earnings
Monju Madras
Prawn Ltd
Ltd Ltd
CU’000 CU’000 CU’000
Balance brought forward 900 480 810
Total comprehensive income for the year 330 195 150
Dividends paid -165 -75 60
Balance carried forward 1065 600 1020
You are also given the following information.
(1)During the year Monju Ltd made sales of CU’120,000 to prawn Ltd at a gross profit of 25% At the year
end prawn Ltd still held CU’54,000 of these goods in inventory.
(2) Impairment reviews at the following dates revealed the following amounts to be written off in respect
of Monju Ltd investment in prawn Ltd and Madras ltd.
Madras
Prawn Ltd
Ltd
CU’000 CU’000
Review at
30 September 20*8 13.5 25.5
30 September 20*9 13.5 9

Requirements
Prepare the consolidated statement of profit or loss and the retained earnings column in the consolidated
statement of changes in equality of the Monju Ltd group for the year ended 30 September 20*9.work to
the nearest CU’000.

Chapter-13 (Answer - 11)

Consolidated statement of profit or loss for the year ended 30 september2019

CU'000
Revenue(w2) 1725
cost of sales and expenses (W2) -1114.5

share of profit of associates of associates (w5) 16

profit before tax 626.5
Income tax expenses (w2) -187.5
profit for the year 439
profit attributable to:
Owners of king Ltd 373
Non controlling interest (w3) 66

Consolidated statement of changes in equity for the year ended 30 september 20*9
Retained
CU'000
Balance brought forward (w4) 900
Total comprehensive income for the year 373
Dividends paid on ordinary shares -165
Balance carried forward 1108

Workings 1:
Group structure
 Monju
Ltd
25%
80%

Madras Ltd

2.Consolidated schedule :
king prawn Adj Consel
CU'000 CU'000 CU'000 CU'000
Revenue 1200 645 -120 1725
C of s and ex.
per Q -825 -382.5 120
purp -13.5
Imapairment of good will -13.5 -1114.5
Income tax -120 -67.5 -187.5
PAT 195

3 .Non controlling interest :

CU'000
Prawn Ltd (330,000*20%) 66

4.Retained earnings brought forward ;

Monju Ltd 900

Prawn Ltd (80%(480-390)) 72
Madras Ltd (25%(810-510)) 75
Less : Impairment to date (13.5+25.5) -39
1008

5.Shares of profit of associates;

CU'000
Madras Ltd( (25%*100)-9) 16
 Chapter-14 (Question - Self Test 05)

Rainbow Ltd.

Rainbow Ltd. holds 80% of the ordinary shares of Zippy Ltd which it purchased five years ago, on 1 July 20X0,
for £160,000. On 1 July 20X5 Rainbow Ltd. sold all of these shares and used the proceeds (£220,000) to
purchase 65% of the ordinary shares of parable Ltd on the same date. The share capitals of Zippy Ltd and
parable Ltd have remained constant for many years at £200,000 and £300,000 respectively. Net assets of
Zippy Ltd and parable Ltd were as follows.
Statements of financial position
parable
Zippy Ltd
Ltd
At At 1 At 1
acquisitio january january
CU CU CU
Net assets 170000 160000 290000

Statements of profit or loss and extracts from the statements of changes in equity for all three
companies for the year ended 31 December 20X5 were as follows.

Statements of profit or loss

Arbitrary XXX Ltd
Particulars
Ltd Group
CU CU CU
Revenue 1820000 451500 972200
Cost of sales (1206400) (286200) (405900)
Gross profit 613600 165300 566300
Distribution costs (107500) (79300) (163900)
Administrative expenses (110000) (26100) (300500)
Dividend received from Zippy Ltd 5000 0 0
Profit before tax 401100 59900 101900
Income tax expense (100000) (2000) (26600)
Profit for the year 301100 57900 75300

Statements of changes in equity

Retained Earnings
Arbitrary Zippy parable
Ltd Ltd Ltd
CUm CUm CUm
Balance b/f 670000 50000 80000
Total comprehensive income for the year 217000 26000 57300
Dividends paid on ordinary shares (40000) (14000)
Balance c/f 847000 62000 137300

No entries have been made in Rainbow Ltd.'s statement of profit or loss relating to the sale of Zippy Ltd.
Zippy Ltd's dividends were paid before disposal.
In an earlier accounting period an impairment loss of £12,700 was recognised in relation to the goodwill
arising on the acquisition of Zippy Ltd.

Requirement
(a) Prepare the consolidated statement of profit or loss and the retained earnings and non-
controlling interest columns for the consolidated statement of changes in equity for Rainbow Ltd.
for the year ended 31 December 20X5 in so far as the information is available.
Note: You should assume that the disposal of Zippy Ltd constitutes a discontinued operation in
accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations.

(b) Calculate the profit on disposal that would be shown in the individual accounts of Rainbow
Ltd. and explain how and why this differs from group profit on disposal.

(c) Briefly discuss the concepts of control and ownership in the context of this disposal.
 Chapter-14 (Answer - Self Test 05)

Rainbow Ltd.

(a) Consolidated statement of profit or loss for the year ended 31 March 20X1
CU
Continuing operations
Revenue (W2) 2306100
Cost of sales (W2) (1409350)
Gross profit 896750
Distribution costs (W2) (189450)
Administrative expenses (W2) (260250)
Profit before tax 447050
Income tax expense (W2) (113300)
Profit for the year from continuing operations 333750
Discontinued operations
Profit for the year from discontinued operations (28950 (W3) + 66040(W4)) 94990
Profit for the year 428740
Profit attributable to:
Owners of Rainbow ltd 409772
Non-controlling interest (W5) 18968
428740

Consolidated statement of changes in equity for the year ended 31 March 20X1
Attributable to owners of XXX Ltd
 Non
Retained
controllin
Earnings
g interest
CUm CUm
Balance b/f (W6)+(W7) 592000 32000
Total comprehensive income for the year 409772 18968
Added on acquisition of subsidiary (w8) 0 114678
Eliminated on disposal of subsidiary (W4) (34990)
Dividend paid on ordinary shares (40000) (2800)
Balance c/f 961772 127856

Non-controlling interest carried forward : proof

Parable CU
Net assets at 1 January 20X5 290000
Profit for year ended 31 December 20X5 75300
365300
NCI 35% 27855

(b)Calculation of profit in individual accounts of Rainbow Ltd.

CU
Sales proceeds 220000
Less: Cost (160000)
Profit 60000

The different calculations of profit on disposal reflect the different way in which the subsidiary (Zippy Ltd) is
accounted for in the individual and consolidated accounts.

In the individual statement of financial position of Rainbow Ltd. Zippy Ltd is carried at cost of £160,000. The
profit on disposal is therefore the sale proceeds less this cost.

In the consolidated financial statements the cost of Zippy Ltd is replaced with its underlying net assets and
with goodwill acquired in the business combination. The profit on disposal is therefore based on sale
proceeds less the percentage of net assets being sold (here 80%) less the unimpaired goodwill which is being
sold in full (as it only ever related to the 80% share of net assets acquired).

(c)Application of control and ownership ideas

Control
Up to 1 July 20X5 Rainbow Ltd. owns 80% of Zippy Ltd and therefore controls it. So the consolidated
statement of profit or loss should include 100% of Zippy Ltd's profits up to that date.

After 1 July 20X5 Rainbow Ltd. no longer controls Zippy Ltd. Its results should be excluded from the
consolidated statement of profit or loss for the last six months of the year and also from the consolidated
statement of financial position at the year end. This treatment reflects the fact that once Zippy Ltd has been
sold its resources are no longer under group control.
Ownership

For the first six months of the year 100% of Zippy Ltd's profits are included in the consolidated statement of
profit or loss. However, 20% of its profits are owned by the non-controlling interest and this has to be
deducted in arriving at the group's share of profit (£57900* 6/12 * 20%)
For the first six months of the year 100% of Zippy Ltd's profits are included in the consolidated statement of
profit or loss. However, 20% of its profits are owned by the non-controlling interest and this has to be
deducted in arriving at the group's share of profit (£57900* 6/12 * 20%)

WORKINGS
(1) Group structure

Rainbow Ltd

80% 65%

Zippy Ltd Parable Ltd

(2) Consolidation schedule for CSPL

Arbitrary parable
Ltd Ltd Consol
CU CU CU
Revenue 1820000 486100 2306100
Cost of sales (1206400) (202950) (1409350)
Distribution Cost (107500) (81950) (189450)
admin exp (110000) (150250) (260250)
Tax (100000) (13300) (113300)
PAT 37650

(3) Profit for year to disposal

CUm
Profit After Tax 57900*6/12 28950
28950

(4) Profit on disposal of

CUm CUm
Sales proceeds 220000
Less: Carrying amount of goodwill at date of disposal:
Consideration transferred 160000
Non-controlling interest at acquisition(170000*20%) 34000
Less net assets at acquisition (170000)
Goodwill at acquisition 24000
Less impairment to date (10000)
(14000)

Less: carrying amount of net assets at disposal :

Net assets at 1 january 20X5 160000
profit to 1 july 20X5(w3) 28950
Dividends paid (14000)
(174950)
Add back NCI in net assets at date of disposal (174950 *20%) 34990
Profit on disposal 66040

(5) Non-controlling interest in year

 CUm
Zippy Ltd (20%*28950)(W3) 5790
Parable Ltd.(35%*37650)(W2) 13178
18968

(6) Group retained earnings b/f for CSCE

CU
Rainbow Ltd. 670000
Zippy Ltd (80% * (50000-(170000-200000)) (64000)
Goodwill impairment to date (14000)
592000

(7) Non-controlling interest B/F

CU
Zippy Ltd.(160000*20%) 32000

(8)Non Controlling interest added on acquisition to subsidiary

CU
Parable Ltd ((290000+37650)*35%) 114678
Parable Ltd ((290000+37650)*35%)

Chapter-15 (Question)

Below is the consolidated financial position of the Othello Group as at 30june 2008 and the consolidated
statement of profit or loss for the year ended on that day;

2008 2009
Non current Assets; cu'000 cu'000
Property,plant,equipment 2034 1975
Current Assets:
Inventories 368 264
Receivables 303 208
Cash & cash equivalents 147 119
818 546
2852 2570
Equity attributable to owners of the parent;
Share capital 500 500
Retained earnings 1819 1559
2319 2059
non-controling interest 241 256
Total Equity 2560 2315
Current Liability;
Trade Payables 190 204
Income Tax payable 102 51
292 255
2852 2570

Consolidated Staement of profit or loss for the year ended at 30 june 2008
Continuing operations; cu'000
Profit before tax 431
Income tax expense -145
profit from continuing operation 286
profit from discontinuing operation 25
profit for the year 311
Profit attributable to;
owners of Othello ltd 260
non-controling interest 51
311
Othello Ltd sold it's entire interest in Desdemona Ltd for cu'200000 on 31 march 2008
It had acquired an 80% interest in desdemona ltd on incorporation several years ago.The
net assets at the date of disposal were;
cu'000
PPE 195
Inventories 25
Receivables 19
Cash & cash equivalents 10
Trade Payables -21
228

The profit for the period from discontinued operations fogure is made up as follows;
cu'000
profit before tax 10
Income tax expense -2
profit on disposal 17
28
The depreciation charge for the year was cu,400000.There were no disposal of non
current assets other than on the disposal of the subsidiary.

Requirements;
a.Show how the disposal will be reflected in the statements of cash flows for the year ended 3o june 2008
b.Calculate additions to property,plant,equipment as they will be reflected in the statements of cash flows.
c.Calculate dividends paid to the non c0ntroling interest.
d.prepare the note to the statements of cash flows required for the disposal of the subsidiary.
e.Prepare the reconciliation of profit before tax to cash generated from operations.Work to the
nearest 000.
 Chapter-15 (Solution)

a.cash flows from investing activities; cu'000

Disposal of subsidiary,net of cash disposed of (200-10) 190

b.cash flows from investing activities; cu'000

purchase of property,plant,equipment(w-1) 654

c.cash flows from financing activities; cu'000

Dividends paid to non- controling interest(w-2) 21

d.Note to the statement of cash flows; cu'000

cash & cash equivalents 10
inventories 25
receivables 19
ppe 195
payables -21
non-controling interest(w-2) -46
183
profit on disposal 17
Total sales proceeds 200
Less; cash of Desdemona ltd. Disposed of -10
Cash flow on disposal net of cash disposed of 190

e.Reconciliation of profit before tax to cash generated from operations; cu'000

profit before tax (431+10) 441
Adjustment for; depreciation 400
841
increase in receivables ( 302-208+19) -113
increase in inventories (368-267+25) -126
increase in payables ( 190-204+21) 7
609

Chapter-15 (Question - Self Test 09)

Aks Ltd
Aks Ltd has a number of subsidiaries and an investment in a joint venture. A junior accountant has
prepared the following group statement of cash flows.

Consolidated statement of cash flows for the year ended 31 December 2019
CUm CUm
Net cash from operating activities 708
Cash flows from investing activities :
Purchase of property,plant and equipment -210
Net cash used in investing activities -210
Cash flows from financing activities:
Repayment of loan notes -160
Net cash used in financing activities -160
Net increase in cash and cash equivalents 338

Note. Reconciliation of profit before tax to net cash from operating activities
CUm
Group profit before taxation 670
Depredation 240
Interest expense 30
940

Decrease in inventories 84
Increase in trade receivables -32
Decrease in trade payables -114
Cash generated from operations 878

Interest paid -40

Income tax paid -130
708

The increase in cash and cash equivalents shown above doesn't agree to the amounts of cash and cash and
cash equivalents shown in the consolidated statements of financial position at 31 December
2018(CU248,000)and 31 December 2019(CU470,000).This is because the following issues have not been
taken into account:

(1) Aks Ltd acquired a 100% subsidiary during the year.The assets acquired and consideration transferred
were as follows:
CUm
Property, plant and equipment 180
Inventories 40
Trade receivable 50
Cash and cash equivalents 30
Trade payables -80
Goodwill 60
280

(2) Non-controlling interest brought forward at the beginning of the year was CU70m.Profit attributable to
the Non-controlling interest for the year ended 31 December 2019 was CU35m.The consolidated statement
of
financial position at 31 December 2019 showed Non-controlling interest at CU79m.
(3) The group profit before taxation includes CU8m being group share of profit of a joint venture.
During the year dividends of CU6m were received from the joint venture.

Requirement
In accordance with IAS 7 statement of cash flows,prepare an amended statement of cash flows and
reconciliation of profit before tax to net cash from operating activities for Aks Ltd for the year ended 31
December 2019,taking account of issue 1 to 3 above.
 Chapter-15 (Answer - Self Test 09)

AKS LTD
Statement of cash flows for the year ended 31 December 2019
CUm CUm
Net cash from operating activities 702
Cash flows from investing activities:
Purchase of property, plant and equipment (210-180) -30
Acquisition of subsidiary net of cash acquired (280-30) -250
Dividend received from joint venture 6
Cash used in investing activities -268
Cash flows from financing activities:
Repayment of loan notes -160
Dividend paid to Non-controlling interest (140+70-158) -52
Cash used in financing activities -212
Net increase in cash and cash equivalents 222
Cash and cash equivalents at 31 December 2018 248
Cash and cash equivalents at 31 December 2019 470

Note:
Reconciliation of profit before tax to net cash from operating activities
CUm
Group profit before taxation 670
Less: share of profit of joint venture -16
Depreciation 240
Interest expense 30
924
Decrease in inventories(84+40 re acq) 124
Decrease in trade receivables(32-50 re acq) 18
Decrease in trade payables (114+80 re acq) -194
Cash generated from operations 872
Interest paid -40
Income tax paid -130
Net cash from operating activities 702

Chapter-10 (Question)

The statement of profit or loss and statement of financial position for the year 20X3 for Mak Ltd are
given below:
Statements of Profit or Loss

For The Year Ended 31, December 20X3

Particulars Mak Ltd (CU) Hill Ltd (CU)

Revenue 15,000 10,000
Cost of sales -10,000 -5,000
Gross profit 5,000 5,000
Expenses and tax -4,000 -2,000
Profit 1,000 3,000

Statements of Financial Position

 At 31 December 20X3
Particulars Mak Ltd (CU) Hill Ltd (CU)
ASSETS
Non-current assets
Property, plant and equipment 30,000 14,000
Investment (4500 shares in Hill Ltd at cast) 4,500
34,500 14,000
Current assets 25,400 9,000
Total assets 59,900 23,000
EQUITY AND LIABILITIES
Equity:
ordinary share capital 12,000 6,000
Share premium account 6,500
Retained earnings 4,000 8,000
Total equity 22,500 14,000
Non-current liabilities 12,000 4,000
Current liabilities 25,400 5,000
Total equity and liabilities 59,900 23,000

Mak Ltd has owned 75% of Hill Ltd since incorporation.

Requirement: Prepare, for Mak Ltd, the consolidated statement of profit or loss for the year ended 31
December 20X3 and the consolidated statement of financial position at that date.

Chapter-10 (Answer)

Consolidated Statement of Profit or Loss

For The Year Ended 31, December 20X3

Particulars CU
Revenue (15000+10000) 25,000
Cost of sales(10000+5000) -15,000
Gross Profit 10,000
Expenses and tax(4000+2000) -6,000
Profit 4,000
Profit attributable to
Owners of Mak Ltd(H) 3,400
3000×20% 600
4,000

Consolidated Statement of Financial Position

At 31, December 20X3

Particulars CU
ASSETS
Non-current assets
Property, plant and equipment (30000+14000) 44,000
Current assets (25400+9000) 34,400
Total Assets 78,400
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Ordinary share capital 12,000
Share premium account 6,500
Retained earnings (4000+8000×80%) 10,700
Non-controlling interest (14000 × 20%) 2,800
Total equity 32,000
Non-current liabilities (12000+4000) 16,000
Current liabilities (25400+5000) 30,400
Total equity and liabilities 78,400