Errata: Group Statements Vol 2 17 th ed, Reprint 2021

Please note: All changes are indicated in italics.

Chapter 9
Pages 5–6

Example 9.1 Recognition of identifiable liabilities

On 1 April 20.18 P Ltd acquired 90% of the shares of S Ltd. From that date P Ltd had
control over S Ltd as per the definition of control in accordance with IFRS 10. On
1 April 20.18, S Ltd had correctly recognised a liability of R350 000 in respect of a
breach of contract that was previously filed against the entity. Furthermore, on
1 April 20.18 P Ltd was planning to restructure the operations of S Ltd. The restructuring
costs were estimated at R240 000. Ignore any tax consequences.
As part of the business combination on 1 April 20.18, P Ltd shall recognise the
identifiable liability for the breach of contract amounting to R350 000. However, on
1 April 20.18 there is no present obligation for the restructuring provision. The
restructuring is rather a result of the business combination. P Ltd will only recognise the
provision for the restructuring of R240 000 in the period after the business combination.
This will give rise to the following pro forma consolidation journal entry (*):
Dr Cr
R R
1 April 20.18
Equity at acquisition (SCE) 0
Liability (SFP) (350 000 fair value – 350 000 carrying amount) 0
Remeasurement of liability to fair value

Page 11

Example 9.4 Remeasurement of liability to fair value

On 1 January 20.17 P Ltd acquired a 100% controlling interest in S Ltd. On acquisition

date, S Ltd’s liabilities included 10 000 7% debentures of R100 each, issued on
1 January 20.16 to Z Ltd. The debentures are redeemable at nominal value on
31 December 20.20 and interest is payable annually in arrears. On 1 January 20.16
the applicable discount rate was 10% and on 1 January 20.17 the applicable discount
rate reduced to 9%. Ignore any tax consequences.
On 1 January 20.17 the assets acquired and liabilities assumed of S Ltd should be
measured at fair value.
S Ltd already accounted for the debentures in its individual accounting records
according to IFRS 9. Therefore, the pro forma consolidation journal entries will account
for the difference between the carrying amount of the debentures in S Ltd’s individual
financial statements and the fair value as calculated in accordance with IFRS 3.
 Errata: Group Statements Vol 2 17th ed, Reprint 2021

S Ltd Group Difference

(1)
Fair value 1 January 20.16 886 276
(2)
Finance costs 88 628
Debenture payment (70 000)

Amortised cost 31 December 20.16 R904 904

(3)
Carrying amount/Fair value 1 January 20.17 904 904 935 206 30 302
(5) (4)
Finance costs 90 490 84 169 (6 321)
Debenture payment (70 000) (70 000) –
Amortised cost 31 December 20.16 R925 394 R949 375 R23 981

(1) Pmt = 70 000; i = 10%; n = 5; FV = 1 000 000 (2) 886 276 × 10%
(3) Pmt = 70 000; i = 9%; n = 4; FV = 1 000 000 (4) 935 206 × 9%
(5) 904 904 × 10%

The pro forma consolidation journal entry at the date of acquisition will be as follows:
Dr Cr
R R
1 January 20.17
Equity at acquisition (SCE) 30 302
Debenture liability (SFP) 30 302
Remeasurement of debentures

Page 21

Example 9.11 Recognition and measurement of a favourable operating lease

...
S Ltd already accounted for the lease agreement in its individual accounting records
according to IFRS 16. Therefore, the pro forma consolidation journal entries will account
for the difference between the carrying amount of the lease liability and right-of-use
asset in S Ltd’s accounting records and the fair value as calculated in accordance with
IFRS 3.
S Ltd Group Difference
(1) (5)
Lease liability 1 January 20.19 163 715 167 608 3 893
(2) (6)
Finance costs 26 194 25 141 (1 053)
Lease instalment (50 000) (50 000) –
Lease liability 31 December 20.19 R139 909 R142 749 R2 840
(3) (7)
Right-of-use asset 1 January 20.19 153 531 194 425 40 894
(4) (8)
Depreciation (30 706) (38 558) (8 179)
Right-of-use asset 31 December 20.19 R122 825 R155 867 R32 715

(1) Pmt = 50 000; i = 16%; n = 5; FV = 0 (5) Pmt = 50 000; i = 15%; n = 5; FV = 0

(2) 163 715 × 16% (6) 167 608 × 15%
(3) (Pmt = 50 000; i = 16%; n = 6; FV = 0) × 5/6 (7) Pmt = 58 000; i = 15%; i = 5; FV = 0
(4) 153 531/5 or 184 237/6 (8) 194 425/5

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Pages 24, 25

Example 9.14 Measurement of consideration transferred – Asset

S Ltd was incorporated on 1 January 20.15, on which date it issued all of its authorised
share capital to P Ltd in exchange for land owned by P Ltd. From that date P Ltd had
control over S Ltd as per the definition of control in accordance with IFRS 10. The land
had a carrying amount of R1 125 000 in the accounting records of P Ltd and a fair
value of R1 575 000 at that date. Ignore any tax consequences.
The journal entry to account for the acquisition of S Ltd in the separate financial
statements of P Ltd is as follows:
Dr Cr
R R
Investment in S Ltd (SFP) 1 575 000
Property, plant and equipment (Land) (SFP) 1 125 000
Profit on the transfer of land (P/L) 450 000
Recognising the acquisition of S Ltd

(…par deleted…)
The journal entry to account for the issue of the shares in the individual financial
statements of S Ltd is as follows:
Dr Cr
R R
Property, plant and equipment (Land) (SFP) 1 575 000
Share capital (SCE) 1 575 000
Issuing of shares

S Ltd has issued shares worth R1 575 000 in exchange for land worth R1 575 000. In
accordance with IAS 16.16 the land should be measured at its purchase price, which is
R1 575 000.
In the consolidated financial statements, it would not be appropriate to recognise a
gain on the transfer of the land, as P Ltd retained control of the land. In addition, the
land should be recognised in the consolidated financial statements at its previous
carrying amount of R1 125 000 and not at the fair value of R1 575 000.
The following pro forma consolidation journal entries should be processed:
Dr Cr
R R
Share capital of S Ltd (SCE) 1 575 000
Investment in S Ltd (SFP) 1 575 000
Profit on the transfer of land (P/L) 450 000
Property, plant and equipment (Land) (SFP) 450 000
Reversal of intragroup profit; elimination of common items

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Chapter 11
Page 134

C2 Calculation of gain/(loss) on disposal of interest in associate

Proceeds on disposal of interest 66 000
Historic cost of interest disposed of (50 000)
Gain on disposal in P Ltd’s separate records (66 000 – 50 000) 16 000
Since acquisition reserves disposed of
Retained earnings (46 000 + 10 000) (56 000)
Loss on disposal of interest in group context (R40 000)
The calculation can also be done as follows (IAS 28.22(b)):
Proceeds on disposal of interest 66 000
Fair value N/A
Carrying amount on date of disposal (50 000 + 56 000(*)) (106 000)
Loss on disposal of interest in group context (R40 000)

(*) The R56 000 represents P Ltd’s interest in the since acquisition reserves of A Ltd by which the
investment in A Ltd has been adjusted upwards in terms of the equity method.

Chapter 13

Page 227, comment at top of page

Comment
As a starting point to the consolidation, it is important to note that the financial
statements of a subsidiary disposed of before the reporting date will not be combined
(i.e. added together) to those of the parent. The amounts in respect of the post-
acquisition reserves of the subsidiary need be journalised into the consolidated
statement of profit or loss and other comprehensive income and statement of changes
in equity for the period while the subsidiary was controlled by the parent. This approach
is clearly evident in journal 4 below. (sentence deleted)

Page 237
13.9 Partial disposal of an interest in a subsidiary, whereby it becomes
an associate
This section of the work is similar to the section above and also deals with a loss of
control over a subsidiary. The requirements of IFRS 10.25–26 and B97–B99 are also
applicable. The section above addressed the scenario where control was lost, with a
simple investment retained. This section deals with the scenario where control over the
subsidiary is lost, but an interest is retained whereby significant influence is exercised.

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Chapter 14

Page 316
From the information provided, it is evident that the following actual journal entry was
processed in the separate financial statements of P Ltd:
Dr Cr
R R
Bank (SFP) (24 000 shares × R5,00 per share) 120 000
Investment in S Ltd (SFP) (1) 44 000
Gain on buy-back of shares (P/L) 76 000
Recording proceeds and profit on sale of shares
(1) 24 000/120 000 × R220 000 = 44 000 or R176 000 × 24 000/96 000

Page 332, bottom

From the information provided, it is evident that the following actual journal entry was
processed in the separate financial statements of P Ltd:
Dr Cr
R R
Bank (SFP) (28 000 shares × R5,00 per share) 140 000
Investment in S Ltd (SFP)(1) 56 000
Gain on buy-back of shares (P/L) 84 000
Recording proceeds and profit on sale of shares
(1) 28 000/120 000 × R240 000 = 56 000, or 28 000/92 000 × R184 000 = R56 000

Chapter 15

Page 399, top

Dr Cr
R R
J8 Land (SFP) 250
FCTR (SCE) (FC500 × (R2,20 – R2,00)) 100
Exchange differences on translation (OCI)
(FC500 × (R2,50 – R2,20)) 150
Recording effect of movement in exchange rate i.r.o.
fair value remeasurement on land
J9 Revenue (P/L) (FC30 × R2,40) 72
Cost of sales (P/L) 72
Elimination of intragroup sales
J10 Cost of sales (P/L) (FC20 × R2,50 × 20/120) 8
Inventory (SFP) 8
Elimination of unrealised profit on inventory

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Chapter 16

Page 449

Example 16.4 Acquisition and disposal of a subsidiary

The following represents the abridged consolidated statements of the P Ltd Group for
the year ended 31 December 20.17.
P LTD GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 20.17
20.17 20.16
ASSETS
Non-current assets
Land and buildings at cost price 955 000 650 000
Plant and equipment
Cost price 2 490 000 1 850 000
Accumulated depreciation (630 000) (740 000)
Goodwill 75 000 50 000
Investment in associate 1 835 000 910 000
4 725 000 2 720 000
Current assets
Inventory 675 000 405 000
Receivables 805 000 625 000
Bank and money market assets 2 500 75 000
1 482 500 1 105 000
Total assets R6 207 500 R3 825 000
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 1 050 000 600 000
Retained earnings 1 687 500 965 000
2 737 500 1 565 000
Non-controlling interests 495 000 400 000
Total equity 3 232 500 1 965 000
Non-current liabilities
Deferred tax 205 000 125 000
Interest-bearing loans 2 030 000 1 200 000
Total non-current liabilities 2 235 000 1 325 000
Current liabilities
Payables 445 000 305 000
Tax due 45 000 30 000
Shareholders for dividends 250 000 200 000
Total current liabilities 740 000 535 000
Total liabilities 2 975 000 1 860 000
Total equity and liabilities R6 207 500 R3 825 000

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Page 450, top

P LTD GROUP
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 20.17
Revenue 3 250 000
Cost of sales (1 250 000)
Gross profit 2 000 000
Other expenses (767 500)
Finance costs (135 000)
Share of profit of associate
(dividend received – R125 000; equity-accounted profit – R375 000) 500 000
Profit before tax 1 597 500
Income tax expense (400 000)
PROFIT FOR THE YEAR 1 197 500
TOTAL COMPREHENSIVE INCOME FOR THE YEAR R1 197 500
Total comprehensive income attributable to:
Owners of the parent 972 500
Non-controlling interests 225 000
R1 197 500

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Page 459

Associate becomes a subsidiary and a subsidiary becomes

Example 16.5
an associate
The following represent the abridged consolidated statements of the P Ltd Group for
the year ended 31 December 20.17.
P LTD GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 20.17
20.17 20.16
ASSETS
Non-current assets
Property at valuation 1 008 000 650 000
Plant and equipment
Cost price 2 490 000 1 850 000
Accumulated depreciation (630 000) (740 000)
Goodwill 97 500 55 000
Investment in associate 400 000 275 000
Investment in unlisted shares 840 000 840 000
4 202 500 2 930 000
Current assets
Inventory 675 000 405 000
Receivables 805 000 625 000
Bank and money market assets 15 000 75 000
1 495 000 1 105 000
Total assets R5 700 500 R4 035 000
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital 1 050 000 600 000
Retained earnings 1 052 500 477 000
Other components of equity 240 000 –
2 342 500 1 077 000
Non-controlling interests 520 000 400 000
Total equity 2 862 500 1 477 000
Non-current liabilities
Deferred tax 258 000 125 000
Interest-bearing loans 1 840 000 1 898 000
Total non-current liabilities 2 098 000 2 023 000
Current liabilities
Payables 445 000 305 000
Tax due 45 000 30 000
Shareholders for dividends 250 000 200 000
Total current liabilities 740 000 535 000
Total liabilities 2 838 000 2 558 000
Total equity and liabilities R5 700 500 R4 035 000

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Page 462
(a) Analysis of owners’ equity of S Ltd
P Ltd 40% –80%
Total NCI
At Since
i At acquisition (1/1/20.14)
Share capital 500 000 200 000 300 000
Retained earnings 80 000 32 000 48 000
580 000 232 000 348 000
Investment in S Ltd R232 000
ii Since acquisition
 To beginning of current year:
Retained earnings 120 000 48 000 72 000
 Current year:
Profit 1/1/20.17–30/6/20.17 100 000 40 000 60 000
800 000 88 000 480 000
Purchase 200 000 shares 320 000 (320 000)
160 000
Cost price of shares (345 000)
Profit 1/7/20.17–31/12/20.17 150 000 120 000 30 000
R950 000 R208 000 R190 000

P Ltd received dividends amounting to R95 000 from S Ltd while S Ltd was an
associate.

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 Errata: Group Statements Vol 2 17th ed, Reprint 2021

Page 471

Example 16.6 Sundry aspects

The following information relates to the Rain Ltd Group for the year ended
31 December 20.16:
RAIN LTD GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 20.16
20.16 20.15
ASSETS
Non-current assets
Land at valuation 1 941 413 1 632 300
Plant and equipment at cost less accumulated depreciation 2 667 100 2 143 500
Investments in associates 345 000 335 000
Investment in Snow Ltd at fair value – 190 000
Goodwill 52 000 52 000
5 005 513 4 352 800
Current assets
Inventory 960 800 957 200
Trade receivables 1 055 900 1 040 200
Cash and cash equivalents 64 700 66 510
Non-current assets held for sale 72 000 –
2 153 400 2 063 910
Total assets R7 158 913 R6 416 710
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital (2 200 000 shares; 2 000 000 shares) 2 307 500 2 000 000
Foreign currency translation reserve – 36 000
Mark-to-market reserve – 65 082
Revaluation surplus 115 000 50 000
Retained earnings 1 856 750 992 518
4 279 250 3 143 600
Non-controlling interests 343 325 23 210
Total equity 4 622 575 3 166 810
Non-current liabilities
Long-term loan – 700 000
Deferred tax 59 538 44 200
Total non-current liabilities 59 538 744 200
Current liabilities
Trade payables 2 438 700 2 444 000
Shareholders for dividends 4 200 5 000
Tax payable 33 900 56 700
Total current liabilities 2 476 800 2 505 700
Total liabilities 2 536 338 3 249 900
Total equity and liabilities R7 158 913 R6 416 710

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