Acra Exam Solution
Answers
Fundamentals Level – Skills Module, Paper F7 (SGP) Financial Reporting (Singapore) 1 (a) Cost of control in Sardonic: Consideration Shares (18,000 x 2/3 x $5·75) Deferred payment (18,000 x 2·42/1·21 (see below)) Less Equity shares Pre-acquisition reserves: At 1 April 2007 To date of acquisition (13,500 x 4/12) Fair value adjustments (4,100 + 2,400) $’000
June 2008 Answers $’000 69,000 36,000 –––––––– 105,000 24,000 69,000 4,500 6,500 –––––––– 104,000 x 75%
Goodwill $1 compounded for two years at 10% would be worth $1·21. The acquisition of 18 million out of a total of 24 million equity shares is a 75% interest. (b) Patronic Group Consolidated income statement for the year ended 31 March 2008 Revenue (150,000 + (78,000 x 8/12) – (1,250 x 8 months intra group)) Cost of sales (w (i)) Gross profit Distribution costs (7,400 + (3,000 x 8/12)) Administrative expenses (12,500 + (6,000 x 8/12)) Finance costs (w (ii)) Impairment of goodwill Share of profit from associate (6,000 x 30%) Profit before tax Income tax expense (10,400 + (3,600 x 8/12)) Profit for the year Attributable to: Equity holders of the parent Minority interest (w (iii))
(78,000) –––––––– 27,000 ––––––––
$’000 192,000 (119,100) ––––––––– 72,900 (9,400) (16,500) (5,000) (2,000) 1,800 ––––––––– 41,800 (12,800) ––––––––– 29,000 ––––––––– 26,900 2,100 ––––––––– 29,000 –––––––––
(c)
An associate is defined by FRS 28 Investments in Associates as an investment over which an investor has significant influence. There are several indicators of significant influence, but the most important are usually considered to be a holding of 20% or more of the voting shares and board representation. Therefore it was reasonable to assume that the investment in Acerbic (at 31 March 2008) represented an associate and was correctly accounted for under the equity accounting method. The current position (from May 2008) is that although Patronic still owns 30% of Acerbic’s shares, Acerbic has become a
Fundamentals Level – Skills Module, Paper F7 (SGP) Financial Reporting (Singapore) 1 (a) Cost of control in Sardonic: Consideration Shares (18,000 x 2/3 x $5·75) Deferred payment (18,000 x 2·42/1·21 (see below)) Less Equity shares Pre-acquisition reserves: At 1 April 2007 To date of acquisition (13,500 x 4/12) Fair value adjustments (4,100 + 2,400) $’000
June 2008 Answers $’000 69,000 36,000 –––––––– 105,000 24,000 69,000 4,500 6,500 –––––––– 104,000 x 75%
Goodwill $1 compounded for two years at 10% would be worth $1·21. The acquisition of 18 million out of a total of 24 million equity shares is a 75% interest. (b) Patronic Group Consolidated income statement for the year ended 31 March 2008 Revenue (150,000 + (78,000 x 8/12) – (1,250 x 8 months intra group)) Cost of sales (w (i)) Gross profit Distribution costs (7,400 + (3,000 x 8/12)) Administrative expenses (12,500 + (6,000 x 8/12)) Finance costs (w (ii)) Impairment of goodwill Share of profit from associate (6,000 x 30%) Profit before tax Income tax expense (10,400 + (3,600 x 8/12)) Profit for the year Attributable to: Equity holders of the parent Minority interest (w (iii))
(78,000) –––––––– 27,000 ––––––––
$’000 192,000 (119,100) ––––––––– 72,900 (9,400) (16,500) (5,000) (2,000) 1,800 ––––––––– 41,800 (12,800) ––––––––– 29,000 ––––––––– 26,900 2,100 ––––––––– 29,000 –––––––––
(c)
An associate is defined by FRS 28 Investments in Associates as an investment over which an investor has significant influence. There are several indicators of significant influence, but the most important are usually considered to be a holding of 20% or more of the voting shares and board representation. Therefore it was reasonable to assume that the investment in Acerbic (at 31 March 2008) represented an associate and was correctly accounted for under the equity accounting method. The current position (from May 2008) is that although Patronic still owns 30% of Acerbic’s shares, Acerbic has become a