CG 1

The draft statements of financial position of Paps Limited, SAS Limited and SSU Limited on 30
June 20X7 were as follows.
PAS SAS SSU
Assets $ $ $
Non-current assets
Tangible assets 105,000 125,000 180,000
Investments, at cost
80,000 shares in S Co 120,000 – –
60,000 shares in SS Co – 110,000 –
Current assets 80,000 70,000 60,000
305,000 305,000 240,000
Equity and liabilities
Equity
Ordinary shares of $1 each 80,000 100,000 100,000
Retained earnings 195,000 170,000 115,000
275,000 270,000 215,000
Payables 30,000 35,000 25,000
305,000 305,000 240,000
PAPS Limited acquired its shares in SAS Limited on 1 July 20X4 when the reserves of SAS Limited
stood at $40,000; and SAS Limited acquired its shares in SSU Limited on 1 July 20X5 when the
reserves of SSU Co stood at $50,000. It is the group's policy to measure the non-controlling
interest at acquisition at its proportionate share of the fair value of the subsidiary's net assets.

Required
Prepare the draft consolidated statement of financial position of PAPS Group at 30 June 20X7.

CG2
The statements of financial position of Antelope Co, Yak Co and Zebra Co at 31 March 20X4 are
summarised as follows.
Antelope Co Yak Co Zebra Co
$ $ $
Assets
Non-current assets
Freehold property 100,000 100,000 –
Plant and machinery 210,000 80,000 3,000
Investments in subsidiaries
Shares, at cost 110,000 6,200 –
Loan account – 3,800 –
Current accounts 10,000 12,200 –
Current assets
Inventories 170,000 20,500 15,000
Receivables 140,000 50,000 1,000
Cash at bank 60,000 16,500 4,000
 800,000 289,200 23,000

Equity and liabilities

Equity
Ordinary share capital 200,000 100,000 10,000
Retained earnings 379,600 129,200 (1,000)
579,600 229,200 9,000
Current liabilities
Trade payables 160,400 40,200 800
Due to Antelope Co – 12,800 600
Due to Yak Co –– 12,600
Taxation 60,000 7,000 –
800,000 289,200 23,000

Antelope Co acquired 75% of the shares of Yak Co in 20X1 when the credit balance on the
retained earnings of that company was $40,000. No dividends have been paid since that date.
Yak Co acquired 80% of the shares in Zebra Co in 20X3 when there was a debit balance on the
retained earnings of that company of $3,000. Subsequently $500 was received by Zebra Co and
credited to its retained earnings, representing the recovery of an irrecoverable debt written off
before the acquisition of Zebra's shares by Yak Co. During the year to 31 March 20X4 Yak Co
purchased inventory from Antelope Co for $20,000 which included a profit mark-up of $4,000
for Antelope Co. At 31 March 20X4 one half of this amount was still held in the inventories of
Yak Co. Group accounting policies are to make a full allowance for unrealized intra-group
profits.

It is the group's policy to measure the non-controlling interest at its proportionate share of the
fair value of the subsidiary's net assets.

Required
Prepare the draft consolidated statement of financial position of Antelope Co at 31 March
20X4.

CG 3

The draft statements of financial position of Hulk Co, Molehill Co and Pimple Co as at 31 May
20X5 are as follows.
Hulk Co Molehill Co Pimple Co
$ $ $
Assets
Non-current assets
Tangible assets 90,000 60,000 60,000
Investments in
subsidiaries(cost)
Shares in Molehill Co 90,000 – –
Shares in Pimple Co 25,000 42,000 –
Current assets 40,000 50,000 40,000
245,000 152,000 100,000

Equity and liabilities

Equity
Ordinary shares $1 100,000 50,000 50,000
Revaluation surplus 50,000 20,000 –
Retained earnings 45,000 32,000 25,000
195,000 102,000 75,000
Non-current liabilities
12% loan – 10,000 –
Current liabilities
Payables 50,000 40,000 25,000
245,000 152,000 100,000
(a) Hulk Co acquired 60% of the shares in Molehill on 1 January 20X3 when the balance on that
company's retained earnings was $8,000 (credit) and there was no share premium account.
(b) Hulk acquired 20% of the shares of Pimple Co and Molehill acquired 60% of the shares of
Pimple
Co on 1 January 20X4 when that company's retained earnings stood at $15,000.
(c) There has been no payment of dividends by either Molehill or Pimple since they became
subsidiaries.
(d) There was no impairment of goodwill.
(e) It is the group's policy to measure the non-controlling interest at acquisition at its
proportionate share of the fair value of the subsidiary's net assets.

Required
Prepare the consolidated statement of financial position of Hulk Co as at 31 May 20X5.

CG 4
The draft statements of financial position at 30 November 20X4 are as follows.
Joey Margy Hulty
$m $m $m
Assets
Non-current assets
Property, plant and equipment 3,295 2,000 1,200
Investments in subsidiaries and other investments
Margy 1,675
Hulty 700
5,670 2,000 1,200
Current assets 985 861 150
Total assets 6,655 2,861 1,350
Equity and liabilities
Share capital 850 1,020 600
Retained earnings 3,340 980 350
Other components of equity 250 80 40
Total equity 4,440 2,080 990
Non-current liabilities 1,895 675 200
Current liabilities 320 106 160
Total equity and liabilities 6,655 2,861 1,350
The following information is relevant to the preparation of the group financial statements.
(i) On 1 December 20X1, Joey acquired 30% of the ordinary shares of Margy for a cash
consideration of $600 million when the fair value of Margy’s identifiable net assets was $1,840
million. Joey treated Margy as an associate and has equity accounted for Margy up to 1
December 20X3. Joey’s share of Margy’s undistributed profit amounted to $90 million and its
share of a revaluation gain amounted to $10 million. On 1 December 20X3, Joey acquired a
further 40% of the ordinary shares of Margy for a cash consideration of $975 million and gained
control of the company. The cash consideration has been added to the equity accounted
balance for Margy at 1 December 20X3 to give the carrying amount at 30 November 20X4.
At 1 December 20X3, the fair value of Margy’s identifiable net assets was $2,250 million. At 1
December 20X3, the fair value of the equity interest in Margy held by Joey before the business
combination was $705 million and the fair value of the non-controlling interest of 30% was
assessed as $620 million. The retained earnings and other components of equity of Margy at 1
December 20X3 were $900 million and $70 million respectively. It is group policy to measure
the non-controlling interest at fair value.
(ii) At the time of the business combination with Margy, Joey has included in the fair value of
Margy’s identifiable net assets, an unrecognised contingent liability of $6 million in respect of a
warranty claim in progress against Margy. In March 20X4, there was a revision of the estimate
of the liability to $5 million. The amount has met the criteria to be recognised as a provision in
current liabilities in the financial statements of Margy and the revision of the estimate is
deemed to be a measurement period adjustment.
(iii) Additionally, buildings with a carrying amount of $200 million had been included in the fair
valuation of Margy at 1 December 20X3. The buildings have a remaining useful life of 20 years
at 1 December 20X3. However, Joey had commissioned an independent valuation of the
buildings of Margy which was not complete at 1 December 20X3 and therefore not considered
in the fair value of the identifiable net assets at the acquisition date. The valuations were
received on 1 April 20X4 and resulted in a decrease of $40 million in the fair value of property,
plant and equipment at the date of acquisition. This decrease does not affect the fair value of
the non-controlling interest at acquisition and has not been entered into the financial
statements of Margy. Buildings are depreciated on the straight-line basis and it is group policy
to leave revaluation gains on disposal in equity. The excess of the fair value of the net assets
over their carrying value, at 1 December 20X3, is due to an increase in the value of non-
depreciable land and the contingent liability.
(iv) On 1 December 20X3, Joey acquired 80% of the equity interests of Hulty, a private entity, in
exchange for cash of $700 million. Because the former owners of Hulty needed to dispose of
the investment quickly, they did not have sufficient time to market the investment to many
potential buyers. The fair value of the identifiable net assets was $960 million. Joey determined
that the fair value of the 20% non-controlling interest in Hulty at that date was $250 million.
Joey reviewed the procedures used to identify and measure the assets acquired and liabilities
assumed and to measure the fair value of both the non-controlling interest and the
consideration transferred. After that review, Hulty determined that the procedures and
resulting measures were appropriate. The retained earnings and other components of equity of
Hulty at 1 December 20X3 were $300 million and $40 million respectively. The excess in fair
value is due to an unrecognised franchise right, which Joey had granted to Hulty on 1 December
20X2 for five years. At the time of the acquisition, the franchise right could be sold for its
market price. It is group policy to measure the non-controlling interest at fair value.
All goodwill arising on acquisitions has been impairment tested with no impairment being
required

Required
Prepare the group consolidated statement of financial position of Joey as at 30 November 20X4.

IAS 21.1
Acoff Plc (Acoff) is a public limited company based in Ireland. It has shareholdings in two other
companies, Braggs Plc (Braggs) and Van Cleff Plc (Van Cleff). Van Cleff is based in Switzerland
and uses the Swiss Franc (CHF) as its functional currency. Statements of financial position are
shown below for all three companies as at 31 March 2016.
Statements of Financial Position as at 31 March 2016
Acoff Plc Braggs Plc Van Cleff Plc
€ million € million CHF million
Non-current assets
Property, plant & equipment 750 223 80
Investments
(including group companies) 460 76
Current assets
Inventories 310 42 13
Trade receivables 122 75 17
Cash & bank 64 15 8
Total assets 1,706 431 118
Equity
Equity share capital of €1 / CHF1 each 400 100 50
Retained earnings 987 224 40
1,387 324 90
Non-current liabilities
10% Debenture Notes 200 60
Current liabilities
Trade payables 87 36 18
Current taxation 32 11 10
Total equity & liabilities 1,706 431 118
The following additional information may be relevant:
(i) Acoff bought an 80% holding in the equity shares in Braggs on 1 April 2014, when the
retained earnings of Braggs were €180 million. The consideration was agreed at €250 million for
these shares. This amount was paid in cash. The “fair value” method is used by the group for
calculating goodwill on all acquisitions. On 1 April 2014, the fair value of the non-controlling
interest in Braggs was independently assessed at €58 million.
(ii) Acoff bought a 90% holding in the equity shares of Van Cleff on 1 April 2015, when the
retained earnings balance in Van Cleff’s books stood at CHF31.2 million. The consideration
consisted of an immediate cash payment of CHF84 million. Van Cleff operates as an
autonomous entity, although subject to managerial control by the directors of Acoff. The fair
value of the non-controlling interest in Van Cleff at 1 April 2015 was CHF9 million.
(iii) On 1 April 2014, certain patents formed part of the net assets of Braggs, but were not
recognised in its entity financial statements. These had a fair value of €20 million at the date of
acquisition by Acoff. These patents were due to expire 8 years after the date of acquisition by
Acoff.
(iv) During the financial year ended 31 March 2016, Acoff sold goods to Braggs amounting to
€20 million. The transfer price included a profit margin of 20%. Of these goods, 75% remained
in the closing inventory of Braggs at the reporting date. All these goods had been paid for at the
reporting date.
(v) All workings may be rounded to the nearest €0.1m.
(vi) Relevant exchange rates were as follows:
o 1 April 2015 €1 = CHF 1.2
o 31 March 2016 €1 = CHF 1.05
o Average for year ended 31 March 2016 €1 = CHF 1.15
REQUIREMENT:
(a) Prepare the Consolidated Statement of Financial Position for the Acoff group as at 31 March
2016 in accordance with International Financial Reporting Standards.

1AS 21.2
The following Statements of Profit or Loss and other Comprehensive Income relate to Allen Plc
(Allen) and its investee companies, Corrib Plc (Corrib) and Neagh Plc (Neagh). Neagh is based in
Northern Ireland. It produces, sells, and is managed autonomously in Northern Ireland.
Accordingly, its financial statements are presented in GB£ Sterling as the functional currency.
Statements of Profit or Loss and Other Comprehensive Income for year ended 31 July 2017
Allen Plc Corrib Plc Neagh Plc
€ million € million GB£ million
Revenue 225 240 60
Cost of sales (130) (123) (18)
Gross profit 95 117 42
Operating expenses (27) (75) (18)
Finance costs (12) (21) (2.4)
Other income 8
Investment income 14 - -
Profit before taxation 78 21 21.6
Taxation (10) (3) (4)
Profit for the year 68 18 17.6
Other comprehensive income (items that will not be reclassified to profit or loss):
Gains on revaluation of property 24 6 -
Total comprehensive income for the year 92 24 17.6

The following additional information is provided:

(i) Allen purchased a 70% holding in the equity of Corrib on 1 December 2016. The purchase
price was €200 million paid in cash. Goodwill arising on acquisition was calculated at €30
million, using the fair value method. On 31 July 2017, impairment losses amounting to €10
million had been incurred. No accounting entry was made to reflect the impairment.
(ii) Allen purchased a 60% holding in Neagh on 1 August 2016, for an immediate cash payment
of £80 million. On that date, the fair values of the identifiable net assets of Neagh totalled £100
million, which was the same as their carrying values in the books of Neagh. The 40% non-
controlling interest had a fair value of £50 million on 1 August 2016. No impairment of goodwill
had occurred by 31 July 2017. The directors of Allen wish to use the fair value method for all
acquisitions.
(iii) On 1 December 2016, the fair value of certain plant & equipment held by Corrib was €3
million more than its carrying value. This plant & equipment had a useful economic life of 5
years from the date of acquisition. The revised values have not been incorporated into the
books of Corrib and depreciation was accounted for based on the original carrying values.
(iv) During the post-acquisition period Corrib sold goods to Allen for €4 million. These goods
were sold at a gross margin of 25% of transfer price. 30% of the goods remained in the
inventory of Allen at 31 July 2017.
(v) Corrib declared a dividend of €6 million during the year from post-acquisition profits. Allen
has recognised its share of this dividend within ‘investment income’.
(vi) All workings may be taken to the nearest €0.1 million. The £ / € exchange rate was as
follows during the relevant period:
Date £ per €1
1 August 2016 0.89
31 July 2017 0.81
Average for period 0.85

REQUIREMENT:
Prepare a consolidated Statement of Profit or Loss and Other Comprehensive Income for the
Allen Group for year ended 31 July 2017 in accordance with IFRS. Your answer should show
clearly the amount of any exchange gains or losses recognised during the period.
IAS 21.3
Rose, a public limited company, operates in the mining sector. The draft statements of financial
position are as follows, at 30 April 20X8.
Rose Petal Stem
$m $m Dinars m
Assets
Non-current assets:
Property, plant and equipment 370 110 380
Investment in subsidiaries
Petal 113
Stem 46
Financial assets 15 7 50
Current assets 118 100 330
Total assets 662 217 760
Equity and liabilities
Share capital 158 38 200
Retained earnings 256 56 300
Other components of equity 7 4

Non-current liabilities 56 42 160

Current liabilities 185 77 100
Total equity and liabilities 662 217 760

Additional information
(a) On 1 May 20X7, Rose acquired 70% of the equity interests of Petal, a public limited
company. The purchase consideration comprised cash of $94 million. The fair value of the
identifiable net assets recognised by Petal was $120 million excluding the patent below. The
identifiable net assets of Petal at 1 May 20X7 included a patent which had a fair value of $4
million. This had not been recognised in the financial statements of Petal.
The patent had a remaining term of four years to run at that date and is not renewable. The
retained earnings of Petal were $49 million and other components of equity were $3 million at
the date of acquisition. The remaining excess of the fair value of the net assets is due to an
increase in the value of land.

Rose wishes to use the 'full goodwill' method. The fair value of the non-controlling interest in
Petal was $46 million on 1 May 20X7. There have been no issues of ordinary shares since
acquisition and goodwill on acquisition is not impaired. Rose acquired a further 10% interest
from the non-controlling interest in Petal on 30 April 20X8 for a cash consideration of $19
million.
(b) Rose acquired 52% of the ordinary shares of Stem on 1 May 20X7 when Stem's retained
earnings were 220 million dinars. The fair value of the identifiable net assets of Stem on 1 May
20X7 was 495 million dinars. The excess of the fair value over the net assets of Stem is due to
an increase in the value of land. The fair value of the non-controlling interest in Stem at 1 May
20X7 was 250 million dinars. Stem is located in a foreign country and operates a mine. The
income of Stem is denominated and settled in dinars. The output of the mine is routinely traded
in dinars and its price is determined initially by local supply and demand. Stem pays 40% of its
costs and expenses in dollars with the remainder being incurred locally and settled in dinars.
Stem's management has a considerable degree of authority and autonomy in carrying
out the operations of Stem and is not dependent upon group companies for finance. Rose
wishes to use the 'full goodwill' method to consolidate the financial statements of Stem. There
have been no issues of ordinary shares and no impairment of goodwill since acquisition. The
following exchange rates are relevant to the preparation of the group financial statements.
Dinars to $
1 May 20X7 6
30 April 20X8 5
Average for year to 30 April 20X8 5.8

(c) Rose has a property located in the same country as Stem. The property was acquired on 1
May 20X7 and is carried at a cost of 30 million dinars. The property is depreciated over 20 years
on the straight-line method. At 30 April 20X8, the property was revalued to 35 million dinars.
Depreciation has been charged for the year but the revaluation has not been taken into account
in the preparation of the financial statements as at 30 April 20X8.
(d) Rose purchased plant for $20 million on 1 May 20X4 with an estimated useful life of six
years. Its estimated residual value at that date was $1.4 million. At 1 May 20X7, the estimated
residual value changed to $2.6 million. The change in the residual value has not been taken into
account when preparing the financial statements as at 30 April 20X8.

Required
Prepare a consolidated statement of financial position of the Rose Group at 30 April 20X8 in
accordance with International Financial Reporting Standards (IFRS), showing the exchange
difference arising on the translation of Stem's net assets.