QUESTION 1 (suggested solution) (10 marks; 18 minutes)

a)
Investment Ltd. Group
Pro-forma consolidation journal entries for the year ended 30 June 2021

Dt Ordinary share capital (Subs Ltd.) (SCE) 625 000 [0.5]

Dt Retained earnings (Subs Ltd.) (SCE) 25 000 [0.5]
Cr Investment in Subs Ltd. (Investment Ltd.) (SFP) 430 000 [0.5]
Cr Non-controlling interest (SCE) 260 000 [1.5]
Dt Goodwill (SFP) 40 000 [1]

CALCULATIONS
Analysis of equity of Subs Limited
Investment Ltd – 60% 40%
Total At Since NCI
At date of acquisition
Share capital 625 000
Retained earnings 25 000
650 000 390 000 260 000
Goodwill 40 000
Consideration 430 000
b)
Preparation
Investment Ltd. must prepare consolidated financial statements unless they meet all of the
following requirements: [0.5]
• Investment Ltd. is a wholly owned subsidiary of Holding Ltd. and [0.5]
• Investment Ltd. is NOT listed (or in die process of being listed) and [0.5]
• Holding Ltd. prepares consolidated statements in terms of International Financial Reporting
Standards. [0.5]

Investment Ltd. is listed, therefore, they do not meet all the requirements above and must
prepare consolidated financial statements. [1]

• Investment Ltd. must start to consolidate when they acquire control [0.5]

Accounting policy
• Investment Ltd. must ensure when preparing the consolidated financial statements that a
uniform accounting policy is used by both the subsidiaries and the mother for similar
transactions. Bond Ltd. 's accounting policy regarding how land is measured differs from
Investment and Sub Ltd. 's policies. [1]
• Adjustments must therefore be made to ensure uniformity. [0.5]

Reporting date
• The consolidated statements are prepared on 30 June 2022, the year-end of
Investment Ltd. (as well as Subs Ltd.) In this event the reporting date of Bond Ltd. (30 April)
is different from than that of the holding company. [0.5]
• In this situation, Bond Ltd. must prepare additional financial statements on 30 June 2022.
[0.5]
• Bond Ltd. may also adjust the statements which was prepared on 30 April 2022 for material
transactions [0.5]
• since the reporting dates differ by less than 3 months. [0.5]

Available: 7; Maximum: 6