Financial Reporting: Problem Sets

Only available on StudyMode
  • Download(s) : 124
  • Published : November 20, 2012
Open Document
Text Preview
Answers

Fundamentals Level – Skills Module, Paper F7 (INT)
Financial Reporting (International)
1

(a)

December 2008 Answers

Pedantic
Consolidated income statement for the year ended 30 September 2008 $’000
98,000
(72,000)
–––––––
26,000
(3,000)
(7,600)
(500)
–––––––
14,900
(5,400)
–––––––
9,500
–––––––

Revenue (85,000 + (42,000 x 6/12) – 8,000 intra-group sales) Cost of sales (w (i))
Gross profit
Distribution costs (2,000 + (2,000 x 6/12))
Administrative expenses (6,000 + (3,200 x 6/12))
Finance costs (300 + (400 x 6/12))
Profit before tax
Income tax expense (4,700 + (1,400 x 6/12))
Profit for the year
Attributable to:
Equity holders of the parent
Non-controlling interest (((3,000 x 6/12) – (800 URP + 200 depreciation)) x 40%)

(b)

9,300
200
–––––––
9,500
–––––––

Consolidated statement of financial position as at 30 September 2008 Assets
Non-current assets
Property, plant and equipment (40,600 + 12,600 + 2,000 – 200 depreciation adjustment (w (i))) Goodwill (w (ii))
Current assets (w (iii))
Total assets
Equity and liabilities
Equity attributable to owners of the parent
Equity shares of $1 each ((10, 000 + 1,600) w (ii))
Share premium (w (ii))
Retained earnings (w (iv))

55,000
4,500
–––––––
59,500
21,400
–––––––
80,900
–––––––

11,600
8,000
35,700
–––––––
55,300
6,100
–––––––
61,400

Non-controlling interest (w (v))
Total equity
Non-current liabilities
10% loan notes (4,000 + 3,000)

7,000

Current liabilities (8,200 + 4,700 – 400 intra-group balance)

12,500
–––––––
80,900
–––––––

Total equity and liabilities
Workings (figures in brackets in $’000)
(i) Cost of sales
Pedantic
Sophistic (32,000 x 6/12)
Intra-group sales
URP in inventory
Additional depreciation (2,000/5 years x 6/12)

$’000
63,000
16,000
(8,000)
800
200
–––––––
72,000
–––––––

The unrealised profit (URP) in inventory is calculated as ($8 million – $5·2 million) x 40/140 = $800,000.

11

(ii)

Goodwill in Sophistic
Investment at cost
Shares (4,000 x 60% x 2/3 x $6)
Less – Equity shares of Sophistic (4,000 x 60%)
– pre-acquisition reserves (5,000 x 60% see below)
– fair value adjustment (2,000 x 60%)

$’000
(2,400)
(3,000)
(1,200)
––––––

Parent’s goodwill
Non-controlling interest’s goodwill (per question)
Total goodwill
The pre-acquisition reserves are:
At 30 September 2008
Earned in the post acquisition period (3,000 x 6/12)

Alternative calculation for goodwill in Sophistic
Investment at cost (as above)
Fair value of non-controlling interest (see below)
Cost of the controlling interest
Less fair value of net assets at acquisition (4,000 + 5,000 + 2,000) Total goodwill
Fair value of non-controlling interest (at acquisition)
Share of fair value of net assets (11,000 x 40%)
Attributable goodwill per question

$’000
9,600

(6,600)
––––––
3,000
1,500
––––––
4,500
––––––
6,500
(1,500)
––––––
5,000
––––––
9,600
5,900
–––––––
15,500
(11,000)
–––––––
4,500
–––––––
4,400
1,500
––––––
5,900
––––––

The 1·6 million shares (4,000 x 60% x 2/3) issued by Pedantic would be recorded as share capital of $1·6 million and share premium of $8 million (1,600 x $5).
$’000
16,000
6,600
(800)
200
(600)
–––––––
21,400
–––––––

(iii) Current assets
Pedantic
Sophistic
URP in inventory
Cash in transit
Intra-group balance

(iv) Retained earnings
Pedantic per statement of financial position
Sophistic’s post acquisition profit
(((3,000 x 6/12) – (800 URP + 200 depreciation)) x 60%)

(v)

Non-controlling interest (in statement of financial position) Net assets per statement of financial position
URP in inventory
Net fair value adjustment (2,000 – 200)

Share of goodwill (per question)

12

$’000

35,400
300
–––––––
35,700
–––––––
10,500
(800)
1,800
–––––––
11,500 x 40% = 4,600
–––––––
1,500
––––––
6,100
––––––

2

(a)

Candel – Statement of comprehensive...
tracking img