REVISION OF BASIC GROUPS

1
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Laurel acquired 80% of the ordinary share capital of Hardy for $160,000 and 40% of the ordinary
share capital of Comic for $70,000 on 1 January 20X7 when the retained earnings balances were
$64,000 in Hardy and $24,000 in Comic. Laurel, Comic and Hardy are public limited companies.
The statements of financial position of the three companies at 31 December 20X9 are set out
below:
Laurel Hardy Comic
$'000 $'000 $'000
Non-current assets
Property, plant and equipment 220 160 78
Investments

230






450

160

78
Current assets
Inventories 384 234 122
Trade receivables 275 166 67
Cash at bank

42

10

34


701

410

223


1,151

570

301
Equity
Share capital $1 ordinary shares 400 96 80
Share premium 16 3 -
Retained earnings

278

128

97


694

227

177
Current liabilities
Trade payables

457

343

124


1,151

570

301
You are also given the following information:
1 On 30 November 20X9 Laurel sold some goods to Hardy for cash for $32,000. These goods
had originally cost $22,000 and none had been sold by the year-end. On the same date
Laurel also sold goods to Comic for cash for $22,000. These goods originally cost $10,000
and Comic had sold half by the year end.
2 On 1 January 20X7 Hardy owned some items of equipment with a book value of $45,000
that had a fair value of $57,000. These assets were originally purchased by Hardy on 1
January 20X5 and are being depreciated over 6 years.
3 Group policy is to measure non-controlling interests at acquisition at fair value. The fair
value of the non-controlling interests in Hardy on 1 January 20X7 was calculated as
$39,000.
4 Cumulative impairment losses on recognised goodwill amounted to $15,000 at 31
December 20X9. No impairment losses have been necessary to date relating to the
investment in the associate.
Required
Prepare a consolidated statement of financial position for Laurel and its subsidiary as at 31
December 20X9, incorporating its associate in accordance with IAS 28.
REVISION OF BASIC GROUPS

2
PROFORMA SOLUTION
Laurel Group Consolidated statement of financial position as at 31 December 20X9

$'000
Non-current assets

Property, plant and equipment

Goodwill

Investment in associate



Current assets

Inventories

Trade receivables

Cash





Equity attributable to owners of the parent

Share capital $1 ordinary shares

Share premium

Retained earnings



Non-controlling interests



Current liabilities

Trade payables




Workings
1 Group structure









REVISION OF BASIC GROUPS

3
Workings (cont'd)
2 Goodwill
$'000 $'000
Consideration transferred
Non-controlling interests (at 'full' fair value)
Fair value of net assets at acq'n:
Share capital
Share premium
Retained earnings
Fair value adjustment (W7)








Impairment losses







3 Investment in associate

$'000

Cost of associate

Share of post acquisition retained reserves (W4)

Unrealised profit (W6)

Impairment losses








4 Consolidated retained earnings

Laurel

Hardy

Comic


$'000

$'000

$'000

Per question

Less: Provision for unrealised profit re Hardy (W6)


Provision for unrealised profit re Comic (W6)

Fair value adjustment movement (W7)



Less: pre-acquisition retained earnings












Group share of post acquisition retained earnings:


Hardy


Comic


Less: group share of impairment losses









REVISION OF BASIC GROUPS

4
Workings (cont'd)
5 Non-controlling interests


$'000

Non-controlling interests at acquisition (W2)

NCI share of post acquisition retained earnings:

Hardy

Less: NCI share of impairment losses











6 Unrealised profit

Laurel's sales to Hardy:
DR
CR

Laurel's sales to Comic (associate):
DR
CR

7 Fair value adjustments

At
acquisition
date


Movement

At year
end


$'000

$'000

$'000

Property, plant and equipment










Goodwill

Ret'd
earnings


PPE






REVISION OF BASIC GROUPS

5
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
Below are the statements of profit or loss and other comprehensive income of Tyson, its subsidiary
Douglas and associate Frank at 31 December 20X8. Tyson, Douglas and Frank are public limited
companies.
Tyson Douglas Frank
$000 $000 $000
Revenue 500 150 70
Cost of sales

(270)

(80)

(30)
Gross profit 230 70 40
Other expenses (150) (20) (15)
Finance income 15 10
Finance costs

(20)



(10)
Profit before tax 75 60 15
Income tax expense

(25)

(15)

(5)
PROFIT FOR THE YEAR

50

45

10
Other comprehensive income:
Gains on property revaluation, net of tax

20

10

5
TOTAL COMPREHENSIVE INCOME FOR THE YEAR

70

55

15
You are also given the following information:
1 Tyson acquired 80,000 shares in Douglas for $188,000 3 years ago when Douglas had a
credit balance on its reserves of $40,000. Douglas has 100,000 $1 ordinary shares.
2 Tyson acquired 40,000 shares in Frank for $60,000 2 years ago when that company had a
credit balance on its reserves of $20,000. Frank has 100,000 $1 ordinary shares.
3 During the year Douglas sold some goods to Tyson for $66,000 (cost $48,000). None of the
goods had been sold by the year end.
4 Group policy is to measure non-controlling interests at acquisition at fair value. The fair
value of the non-controlling interests in Douglas at acquisition was $40,000. An impairment
test carried out at the year end resulted in $15,000 of the recognised goodwill relating to
Douglas being written off and recognition of impairment losses of $2,400 relating to the
investment in Frank.
Required
Prepare the consolidated statement of profit or loss and other comprehensive income for the year
ended 31 December 20X8 for Tyson, incorporating its associate.
REVISION OF BASIC GROUPS

6
PROFORMA SOLUTION
Tyson Group - Consolidated statement of profit or loss and other comprehensive income
for the year ended 31 December 20X8
$'000
Revenue

Cost of sales

Gross profit

Other expenses

Finance income

Finance costs

Share of profit of associate

Profit before tax

Income tax expense

PROFIT FOR THE YEAR

Other comprehensive income:

Gains on property revaluation, net of tax

Share of other comprehensive income of associates

Other comprehensive income for the year, net of tax

TOTAL COMPREHENSIVE INCOME FOR THE YEAR


Profit attributable to:
Owners of the parent
Non-controlling interests

Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests


Workings
1 Group structure







REVISION OF BASIC GROUPS

7
Workings (cont'd)
2 Non-controlling interests
PFY TCI
$000 $000
PFY/TCI per question

Unrealised profit (W3)

Impairment loss









NCI share





3 Unrealised profit
$'000
Selling price
Cost


Provision for unrealised profit













REVISION OF BASIC GROUPS

8
Answers to examples
STATEMENT OF FINANCIAL POSITION
Laurel Group - Consolidated statement of financial position as at 31 December 20X9
$'000
Non-current assets
Property, plant and equipment (220 + 160 + (W7) 3) 383
Goodwill (W2) 9
Investment in associate (W3)

96.8


488.8
Current assets
Inventories (384 + 234 (W6) 10) 608
Trade receivables (275 + 166) 441
Cash (42 + 10)

52


1,101


1,589.8
Equity attributable to owners of the parent
Share capital $1 ordinary shares 400
Share premium 16
Retained earnings (W4)

326.8
742.8
Non-controlling interests (W5)

47


789.8
Current liabilities
Trade payables (457 + 343)

800.0


1,589.8
Workings
1 Group structure
Laurel
80% 40%
1.1.X7 1.1.X7

Hardy Comic (associate)
$64,000 $24,000 Pre acq'n ret'd earnings
REVISION OF BASIC GROUPS

9
2 Goodwill
$'000 $'000
Consideration transferred 160
Non-controlling interests (at 'full' fair value) 39
Fair value of net assets at acq'n:
Share capital 96
Share premium 3
Retained earnings 64
Fair value adjustment (W7)

12


(175)
24
Impairment losses

(15)

9

3 Investment in associate

$'000

Cost of associate

70

Share of post acquisition retained reserves (W4)

29.2

Unrealised profit (W6)

(2.4)

Impairment losses

(0)


96.8

4 Consolidated retained earnings

Laurel

Hardy

Comic


$'000

$'000

$'000

Per question

278

128

97

Less: PUP re Hardy (W6)

(10)


PUP re Comic (W6)

(2.4)

Fair value adjustment movement (W7)

(9)



Less: pre-acquisition retained earnings

(64)

(24)


55

73

Group share of post acquisition retained earnings:

Hardy (55 80%)

44

Comic (73 40%)

29.2

Less: group share of impairment losses (15 80%)

(12.0)


326.8


5 Non-controlling interests


$'000

Non-controlling interests at acquisition (W2)

39

NCI share of post acquisition retained earnings:

Hardy (55 20%)

11

Less: NCI share of impairment losses (15 20%)

(3)


47


REVISION OF BASIC GROUPS

10
6 Unrealised profit
Laurel's sales to Hardy: $32,000 $22,000 = $10,000
DR Retained earnings (Laurel) $10,000
CR Group inventories $10,000
Laurel's sales to Comic (associate) ($22,000 $10,000) 40% share = $2,400.
DR Retained earnings (Laurel) $2,400
CR Investment in associate $2,400
7 Fair value adjustments

At
acquisition
date


Movement

At year
end


$'000

$'000

$'000

PPE (57 45)
+12

(9)*

+3


*Extra depreciation $12,000

Goodwill

Ret'd
earnings


PPE




REVISION OF BASIC GROUPS

11
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Tyson Group Consolidated statement of profit or loss and other comprehensive
income for the year ended 31 December 20X9

$000

Revenue (500 + 150 66)

584

Cost of sales (270 + 80 66 + (W3) 18)

(302)

Gross profit

282

Other expenses (150 + 20 + 15)

(185)

Finance income (15 + 10)

25

Finance costs

(20)

Share of profit of associate [(10 40%) 2.4*]

1.6

Profit before tax

103.6

Income tax expense (25 + 15)

(40)

PROFIT FOR THE YEAR

63.6

Other comprehensive income:

Gains on property revaluation, net of tax (20 + 10)

30

Share of other comprehensive income of associate (5 40%)

2

Other comprehensive income for the year, net of tax

32.0

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

95.6


Profit attributable to:

Owners of the parent (63.6 2.4)

61.2

Non-controlling interests (W2)

2.4


63.6

Total comprehensive income attributable to:

Owners of the parent (95.6 4.4)

91.2

Non-controlling interests (W2)

4.4


95.6

* Impairment losses could either be included in expenses or deducted from the share of
profit of associates figure. IAS 28 is not prescriptive.
Workings
1 Group structure
Tyson
80% 40%
3 yrs ago 2 yrs ago

Douglas Frank (associate)
$40,000 $20,000 Pre acq'n reserves
REVISION OF BASIC GROUPS

12
2 Non-controlling interests
PFY TCI
$000 $000
PFY/TCI per question 45 55
Unrealised profit (W3) (18) (18)
Impairment loss

(15)

(15)


12

22

NCI share (20%)

2.4

4.4

3 Unrealised profit
$'000
Selling price 66
Cost

(48)
PUP

18