OPEN UNIVERSITY of MAURITIUS

INSTRUCTIONS TO STUDENTS for assignments:

Read properly the mode of submission
Please note that any assignment submitted after the deadline, marks will be deducted as per assignment
submission procedure document.
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Please include a bibliography at the end of your document.
Plagiarism/collusion will be heavily penalised and may result in non-award of marks.

POINTS TO REMEMBER WHEN SUBMITTING YOUR ASSIGNMENT:

MODE OF SUBMISSION:
1. Submit on Blackboard – (by or before due date)
2. Email Soft copy to assign@open.ac.mu (by or before due date)

The current penalty is 2% per day (weekends and public holidays included) for any assignment received after
the due date which the tutor will deduct from the final mark.

The Open University of Mauritius will not hold itself responsible or liable for the non-award of marks if you
fail to submit the assignment as per the required mode of submission.

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Module Name: Financial Statement Analysis for business

Lecturer’s Name: Mr Ata’Ullah Ahseek

Date of Submission: 06 May 2023

Submission Mode: On BLACKBOARD (MANDATORY) + email to assign@open.ac.mu

Total Marks: 50 marks

Word limit: 1500-2000 words

Assignments question:
Answer all questions

Question 1 (10 Marks):

(a) IFRS 5 requires certain conditions to be met before an asset or disposal group can be classified
as held for sale.
What are these conditions? [4 Marks]

(b) A subsidiary entity, Claystone Ltd, is for sale at a price $ 15 million. There has been some interest
from prospective buyers but no sale as yet. One buyer has made an offer of $ 14 million but the
directors of the parent company have declined the offer. An accountant firm which was appointed
by the parent company has just submitted a report and advice that the fair value of Claystone Ltd
is $ 16.5 million. They have decided not to lower the sale price of Claystone Ltd at the moment.
Discuss whether the subsidiary can be classified as held for sale.
[6 Marks]

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Question 2 (40 Marks)
The extract of statement of financial position for the year ended 31 December 2022 for Peridot Ltd and
Slate Ltd are as follows:

Extract of statement of financial position for the year ended 31 December 2022

Equity and liabilities Peridot Ltd Slate Ltd

Equity $ $
Share capital ($ 1 Each) 731,250 630,000
Share premium 450,000 -
Retained earnings 393,750 506,250

Liabilities
Non current liabilities 281,250 112,500

Current liabilities 225,000 22,500

On 01 January 2022, Peridot Ltd acquired 504,000 ordinary shares of Slate Ltd and as a result, Peridot
Ltd holds 80% shares in Slate Ltd. The purchase consideration was as follows:

• Cash paid $ 650,000

• A deferred cash settlement to be paid in five years’ time of $ 250,000
• By an exchange of three shares in Peridot Ltd for every five shares in Slate Ltd. The market price
of Peridot Ltd share at the date of acquisition was $ 2.5 and the market price of each Slate Ltd
share at the date of acquisition was $ 3.25
Legal fees associated with the acquisition were $ 105,000.

The discount rate of Peridot Ltd is 11 %.

(a) Calculate the fair value consideration (Costs of investment) transferred to acquire control of
Slate Ltd at the date of acquisition. Your answer should include a brief explanation if any of the
above issue(s) is/are not required to be accounted in your working(s). [ 10 Marks]

On the acquisition date, the retained earnings of Slate Ltd stood at $ 217,500 and share capital was $
630,000. Slate Ltd had developed an innovative software that has not been recognized in its financial
statements. The directors of Peridot Ltd are of the opinion that the software should be accounted. The
software had a fair value of $ 425,000 and a remaining term four years to go as from the date of
acquisition. The carrying value of Plant and equipment was in excess by $ 90,000 on the acquisition
date. Plant and equipment had a lifetime of three years at the acquisition date. Included within the

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intangible assets of Slate Ltd (at the acquisition and reporting date) is goodwill of $ 15,000 which arose
on the purchase of the trade and assets of a sole-trader business.

(b) Calculate the net assets of Slate Ltd at the date of acquisition (01 January 2022) and at the
reporting date (31 December 2022). [ 10 Marks]

Goodwill has been impaired by $ 75,000 at the reporting date (31 December 2022).

(c) Calculate the goodwill using the proportion method at the date of acquisition (01 January
2022). [ 5 marks]

(d) Calculate the non-controlling interest (NCI) as at 31 December 2022. [ 2 Marks]

Peridot Ltd has recently appointed an accountant, Mr Shale, following the resignation of the previous
group accountant. When Mr Shale was preparing the group accounts for the year ended 31 December
2022, he found that only the cash consideration of $ 650,000 has been accounted. The par value of each
ordinary share for Peridot Ltd is $ 1.

(e) Calculate the group retained earnings as at 31 December 2022. [ 3 Marks]

(f) Prepare an extract of equity (Ordinary shares, Share premium, Retained earnings and NCI)
and liabilities section of the consolidated statement of financial position as at 31 December 2022
showing clearly how the deferred payment and shares exchange should be accounted. [10 Marks]