IFRS 10.

1
Buffalo Ltd holds 20% of the voting rights of Spider Ltd. In addition, Buffalo enters into a
forward contract that obligates it to acquire ordinary shares with an additional 35% of the
voting rights in Spider Ltd. The forward contract will be settled in 22 days’ time. In the
relationship of Buffalo Ltd and Spider Ltd, voting rights are the only relevant factor in
determining power and all significant decisions regarding the relevant activities are required
to be taken on a shareholders’ meeting. 30 days’ notice is required by law to call a
shareholders’ meeting.
Required
Does Buffalo Ltd have power over Spider Ltd?

IFRS 10.2
Boot Ltd holds 30% of the voting rights in Sneakers Ltd, whose relevant activities are
directed through voting rights. Boot Ltd holds an option to acquire an additional 25% of the
voting rights in Sneakers Ltd that is deeply in the money. The option is currently exercisable
and there are no other barriers to prevent Boot Ltd from exercising its option.

Required:
Does Boot Ltd have power over Sneakers Ltd?

IFRS 10.2B
Zambezi Expeditions Ltd was incorporated in 2006. Zambezi Expeditions Ltd’s core business
is guiding tourists to various tourists attractive spots along the Zambezi river. To facilitate its
core business, the company has investment interests in the following entity:
Crocodile Ltd
On 1 March 2016 Zambezi Expeditions Ltd acquired 60% of the issued share capital of
Crocodile Ltd, a company that is in the industry of arranging crocodile watching expeditions
in the Kariba crocodile farming area. Each share carries one voting right. The remaining 40%
of the issued share capital is owned by Mr.Kuomamusoro, the CEO of the company.
Mr.Kuomamusoro is a meteorologist and an expert in predicting weather patterns.
According to the contractual agreement, Mr.Kuomamusoro has rights to refuse boats of
Crocodile Ltd to go out into the Zambezi river when he expects severe weather conditions
that may damage the boats and/ or place the lives of the crew and tourists in danger.
Zambezi Expeditions Ltd has the right to make all other decisions regarding operating
activities.
Required
Discuss with reasons, whether or not the company indicated above is a subsidiary of
Zambezi Expedition Ltd for the year ended 31 December 2017. Your answer must comply
with International Financial Reporting Standards (IFRS)
IFRS 10.3
Statements of financial position as at 31 December 2017
Kustan Ltd Stanku Ltd
$000 $000
Non-current assets 60 50
Investment in Stanku Ltd 50
Current assets 50 50
160 100
Ordinary share capital ($1 shares) 100 40
Retained earnings 30 10
Current liabilities 30 50
160 100

Kustan limited all the shares in Stanku Limited at 31 December 2017.

IFRS 10.4
Kustan Limited regularly sells goods to its one subsidiary company, Stanku Limited, which it
has owned since Stanku Limited incorporation. The statement of financial position of the
two companies on 31 December 2017 are given below.
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2017
Kustan Stanku
$000 $000
Property, plant and equipment 35,000 45,000
Investment in 40,000 $1 shares in Stanku Limited 40,000
Current assets
Inventories 16,000 12,000
Receivables: Stanku Limited 2,000 –
Other 6,000 9,000
Cash at bank 1,000
Total assets 100,000 66,000
Equity and liabilities
40,000 $1 ordinary shares – 40,000
70,000 $1 ordinary shares 70,000 –
Retained earnings 16,000 19,000
86,000 59,000
Current liabilities
Bank overdraft 3,000
Payables: Kustan Limited 2,000
Payables: Other 14,000 2,000
Total equity and liabilities 100,000 66,000
Required:Prepare the consolidated statement of financial position of Kustan limited at 31
December 2017.

IFRS 10.5
Kustan Limited acquired 75% of the shares in Stanku Limited on 1 January 2017 when
Stanku had retained earnings of $15,000. The market price of Stanku's shares just before
the date of acquisition was $1.60. Kustan values NCI at fair value. Goodwill is not impaired.
The statements of financial position of Kustan and Stanku at 31 December 2017 were as
follows: Kustan Stanku Limited
$000 $000
Property, plant and equipment 60,000 50,000
Investment in Stanku Limited 68,000 –
Current assets 52,000 35,000
180,000 85,000
Share capital – $1 shares 100,000 50,000
Retained earnings 70,000 25,000
170,000 75,000
Current liabilities 10,000 10,000
180,000 85,000
Required: Prepare the consolidated statement of financial position of the Kustan Group.

IFRS 10.6
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 20X8
Ping Co Pong Co
$ $
Property, plant and equipment 50,000 40,000
20,000 ordinary shares in Pong Co at cost 30,000
Current assets
Inventory 3,000 8,000
Owed by Ping Co 10,000
Receivables 16,000 7,000
Cash 2,000 –
Total assets 101,000 65,000
Equity and liabilities
Equity Ordinary shares of $1 each 45,000 25,000
Revaluation surplus 12,000 5,000
Retained earnings 26,000 28,000
83,000 58,000
Current liabilities
Owed to Pong Co 8,000 –
Trade payables 10,000 7,000
Total equity and liabilities 101,000 65,000
Ping Co acquired its investment in Pong Co on 1 July 20X7 when the retained earnings of
Pong Co stood at $6,000. The agreed consideration was $30,000 cash and a further $10,000
on 1 July 20X9. Ping Co's cost of capital is 7%. Pong Co has an internally-developed brand
name –Star – which was valued at $5,000 at the date of acquisition. There have been no
changes in the share capital or revaluation surplus of Pong Co since that date. At 30 June
20X8 Pong Co had invoiced Ping Co for goods to the value of $2,000 and Ping Co had sent
payment in full but this had not been received by Pong Co. There is no impairment of
goodwill. It is group policy to value NCI at full fair value. At the acquisition date the NCI was
valued at $9,000.
Required: Prepare the consolidated statement of financial position of Ping Co as at 30 June
20X8.

IFRS 10.7
On 1 April 20X8, Plumtree Limited acquired 60% of the equity share capital of Shangani
Limited in a share exchange of two shares in Plumtree for three shares in Shangani. At that
date the retained earnings of Shangani were $5 million. The issue of shares has not yet been
recorded by Plumtree. At the date of acquisition shares in Plumtree had a market value of
$6 each. Below are the summarised draft statements of financial position of both
companies.
STATEMENTS OF FINANCIAL POSITION AS AT 30 SEPTEMBER 20X8
Plumtree Shangani
Assets $'000 $'000
Property, plant and equipment 40,600 12,600
Current assets 16,000 6,600
Total assets 56,600 19,200
Equity and liabilities
Equity shares of $1 each 10,000 4,000
Retained earnings 35,400 6,500
45,400 10,500
Non-current liabilities 10% loan notes 3,000 4,000
Current liabilities 8,200 4,700
Total equity and liabilities 56,600 19,200
Additional information
a) At the date of acquisition, the fair values of Shangani's assets were equal to their
carrying amounts with the exception of an item of plant, which had a fair value of $2
million in excess of its carrying amount. It had a remaining life of five years at that
date (straight-line depreciation is used). Shangani has not adjusted the carrying
amount of its plant as a result of the fair value exercise.
b) Sales from Shangani to Plumtree in the post-acquisition period were $8 million.
Shanganimade a mark up on cost of 40% on these sales. Plumtree had sold $5.2
million (at cost to Plumtree) of these goods by 30 September 20X8.
c) Shangani's trade receivables at 30 September 20X8 include $600,000 due from
Plumtree which did not agree with Plumtree's corresponding trade payable. This was
due to cash in transit of $200,000 from Plumtree to Shangani. Both companies have
positive bank balances.
d) Plumtree has a policy of accounting for any non-controlling interest at full fair value.
The fair value of the non-controlling interest in Shangani at the date of acquisition
was estimated to be $5.9 million. Consolidated goodwill was not impaired at 30
September 20X8.
Required:Prepare the consolidated statement of financial position for Plumtree as at 30
September 20X8

IFRS 10.8
On 1 July 20X8 Crocodile acquired 60,000 of the 100,000 shares in Plank, its only subsidiary.
The draft statements of profit or loss and other comprehensive income of both companies
at 31 December 20X8 are shown below:
Crocodile Plank
$'000 $'000
Revenue 43,000 26,000
Cost of sales (28,000) (18,000)
Gross profit 15,000 8,000
Other income – dividend received from Plank 2,000 –
Distribution costs (2,000) (800)
Administrative expenses (4,000) (2,200)
Finance costs (500) (300)
Profit before tax 10,500 4,700
Income tax expense (1,400) (900)
Profit for the year 9,100 3,800
Other comprehensive income:
Gain on property revaluation (Note (i)) – 2,000
Investment in equity instrument 200 –
Total comprehensive income for the year 9,300 5,800
Additional information:
(i) At the date of acquisition the fair values of Plank's assets were equal to their
carrying amounts with the exception of a building which had a fair value $1m in
excess of its carrying amount. At the date of acquisition the building had a
remaining useful life of 20 years. Building depreciation is charged to
administrative expenses. The building was revalued again at 31 December 20X8
and its fair value had increased by an additional $1m.
(ii) Sales from Crocodile to Plank were $6m during the post-acquisition period. All of
these goods are still held in inventory by Plank. Crocodile marks up all sales by
20%.
(iii) Despite the property revaluation, Crocodile has concluded that goodwill in Plank
has been impaired by $500,000.
(iv) It is Crocodile's policy to value the non-controlling interest at full (fair) value.
(v) Income and expenses can be assumed to have arisen evenly throughout the year.
Required :Prepare the consolidated statement of profit or loss and other comprehensive
income for the year ended 31 December 20X8.

IFRS 10.9
On 1 July 2014 Buffalo acquired 80% of Coughar’s equity shares on the following terms:
i. a share exchange of two shares in Buffalo for every three shares acquired in
Coughar;
ii. a cash payment due on 30 June 2015 of $1·54 per share acquired (Buffalo’s cost of
capital is 10% per annum). At the date of acquisition, shares in Buffalo and Coughar
had a stock market value of $3·00 and $2·50 each respectively.
Statements of profit or loss for the year ended 31 March 2015
Buffalo Coughar
$’000 $’000
Revenue 24,200 10,800
Cost of sales (17,800) (6,800)
––––––– –––––––
Gross profit 6,400 4,000
Distribution costs (500) (340)
Administrative expenses (800) (360)
Finance costs (400) (300)
––––––– –––––––
Profit before tax 4,700 3,000
Income tax expense (1,700) (600)
––––––– –––––––
Profit for the year 3,000 2,400
––––––– –––––––
Equity in the separate financial statements of Coughar as at 1 April 2014:
 $’000
Equity
Equity shares of $1 each 12,000
Retained earnings 13,500
Additional information:

a) At the date of acquisition, the fair values of Coughar’s assets were equal to their
carrying amounts with the exception of an item of plant which had a fair value of
$720,000 above its carrying amount. The remaining life of the plant at the date of
acquisition was 18 months. Depreciation is charged to cost of sales.
b) On 1 April 2014, Coughar commenced the construction of a new production facility,
financing this by a bank loan. Coughar has followed the local GAAP in the country
where it operates which prohibits the capitalisation of interest. Buffalo has
calculated that, in accordance with IAS 23 Borrowing Costs, interest of $100,000
(which accrued evenly throughout the year) would have been capitalised at 31
March 2015. The production facility is still under construction as at 31 March 2015.
c) Sales from Buffalo to Coughar in the post-acquisition period were $3 million at a
mark-up on cost of 20%. Coughar had $420,000 of these goods in inventory as at 31
March 2015.
d) Buffalo’s policy is to value the non-controlling interest at fair value at the date of
acquisition. For this purposeCoughar’s share price at that date can be deemed to be
representative of the fair value of the shares held by the non-controlling interest.
e) On 31 March 2015, Buffalo carried out an impairment review which identified that
the goodwill on the acquisition of Coughar was impaired by $500,000. Impaired
goodwill is charged to cost of sales.

Required:
(a) Calculate the consolidated goodwill at the date of acquisition of Coughar.
(b) Prepare extracts from Buffalo’s consolidated statement of profit or loss for the year
ended 31 March 2015, for:
(i) revenue;
(ii) cost of sales;
(iii) finance costs;
(iv) profit or loss attributable to the non-controlling interest

IAS 28.1
Hever has held shares in two companies, Spiro and Aldridge, for a number of years. As at 31
December 20X4 they have the following statements of financial position:
Hever Spiro Aldridge
$'000 $'000 $'000
Non-current assets
 Property, plant & equipment 370 190 260
Investments 218 – –

Current assets
Inventories 160 100 180
Trade receivables 170 90 100
Cash 50 40 10
968 420 550

Equity
Share capital ($1 ordinary share) 200 80 50
Share premium 100 80 30
Retained earnings 568 200 400
868 360 480
Current liabilities
Trade payables 100 60 70
968 420 550
Additional information:
(i) The 'investments' in the statement of financial position comprise solely Hever's
investment in Spiro $128,000 and in Aldridge $90,000.
(ii) The 48,000 shares in Spiro were acquired when Spiro's retained earnings stood at
$20,000. The 15,000 shares in Aldridge were acquired when that company had a
retained earnings balance of $150,000.
(iii) When Hever acquired its shares in Spiro the fair value of Spiro's net assets
equalled their book values with the following exceptions:
$'000
Property, plant and equipment 50 higher
Inventories 20 lower (sold during 20X4)
Depreciation arising on the fair value adjustment to non-current assets since this
date is $5,000.
(iv) During the year, Hever sold inventories to Spiro for $16,000, which originally cost Hever
$10,000. Three-quarters of these inventories have subsequently been sold by Spiro.
(iv) No impairment losses on goodwill had been necessary by 31 December 20X4.
(v) It is group policy to value non-controlling interests at full (or fair) value. The fair
value of the noncontrolling interests at acquisition was $90,000.
Required: Produce the consolidated statement of financial position for the Hever group

IAS 28.2
Laurel acquired 80% of the ordinary share capital of Hardy for $160m and 40% of the
ordinary share capital of Comic for $70m on 1 January 20X7 when the retained earnings
balances were $64m in Hardy and $24m 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
$m $m $m
Non-current assets
Property, plant and equipment 220 160 78
Investments 230 - -

Current assets
Inventories 384 234 122
Trade receivables 275 166 67
Cash at bank 42 10 34
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
Additional information:
a) On 30 November 20X9 Laurel sold some goods to Hardy for cash for $32m. These
goods had originally cost $22m and none had been sold by the year end. On the
same date Laurel also sold goods to Comic for cash for $22m. These goods originally
cost $10m and Comic had sold half by the year end.
b) On 1 January 20X7 Hardy owned some items of equipment with a book value of
$45m that had a fair value of $57m. These assets were originally purchased by Hardy
on 1 January 20X5 and are being depreciated over 6 years.
c) 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 $39m.
d) Cumulative impairment losses on recognised goodwill amounted to $15m 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

IAS 28.3
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
$m $m $m
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
Additional information:
a) Tyson acquired 80m shares in Douglas for $188m three years ago when Douglas had
a credit balance on its reserves of $40m. Douglas has 100m $1 ordinary shares.
b) Tyson acquired 40m shares in Frank for $60m two years ago when that company had
a credit balance on its reserves of $20m. Frank has 100m $1 ordinary shares.
c) During the year Douglas sold some goods to Tyson for $66m (cost $48m). None of
the goods had been sold by the year end.
d) 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 $40m. An
impairment test carried out at the year-end resulted in $15m of the recognised
goodwill relating to Douglas being written off and recognition of impairment losses
of $2.4m 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.

IAS 28.4
On 1 October 2013, Penketh acquired 90 million of Sphere’s 150 million $1 equity shares.
The acquisition was achieved through a share exchange of one share in Penketh for every
three shares in Sphere. At that date the stock market prices of Penketh’s and Sphere’s
shares were $4 and $2·50 per share respectively. Additionally, Penketh will pay $1·54 cash
on 30 September 2014 for each share acquired. Penketh’s finance cost is 10% per annum.
The retained earnings of Sphere brought forward at 1 April 2013 were $120 million. The
summarised statements of profit or loss and other comprehensive income for the
companies for the year ended 31 March 2014 are:
 Penketh Sphere
$’000 $’000
Revenue 620,000 310,000
Cost of sales (400,000) (150,000)
–––––––– ––––––––
Gross profit 220,000 160,000
Distribution costs (40,000) (20,000)
Administrative expenses (36,000) (25,000)
Investment income (note (iii)) 5,000 1,600
Finance costs (2,000) (5,600)
–––––––– ––––––––
Profit before tax 147,000 111,000
Income tax expense (45,000) (31,000)
–––––––– ––––––––
Profit for the year 102,000 80,000
Other comprehensive income
Gain/(loss) on revaluation of land (notes (i) and (ii)) (2,200) 3,000
–––––––– ––––––––
Total comprehensive income for the year 99,800 83,000
–––––––– ––––––––
Additional information:
a) A fair value exercise conducted on 1 October 2013 concluded that the carrying amounts
of Sphere’s net assets were equal to their fair values with the following exceptions:
 the fair value of Sphere’s land was $2 million in excess of its carrying amount
 an item of plant had a fair value of $6 million in excess of its carrying amount.
The plant had a remaining life of two years at the date of acquisition. Plant
depreciation is charged to cost of sales.
 Penketh placed a value of $5 million on Sphere’s good trading relationships with
its customers. Penketh expected, on average, a customer relationship to last for
a further five years. Amortisation of intangible assets is charged to administrative
expenses.
b) Penketh’s group policy is to revalue land to market value at the end of each
accounting period. Prior to its acquisition, Sphere’s land had been valued at historical
cost, but it has adopted the group policy since its acquisition. In addition to the fair
value increase in Sphere’s land of $2 million (see note (i)), it had increased by a
further $1 million since the acquisition.
c) On 1 October 2013, Penketh also acquired 30% of Ventor’s equity shares. Ventor’s
profit after tax for the year ended 31 March 2014 was $10 million and during March
2014 Ventor paid a dividend of $6 million. Penketh uses equity accounting in its
consolidated financial statements for its investment in Ventor. Sphere did not pay
any dividends in the year ended 31 March 2014.
d) After the acquisition Penketh sold goods to Sphere for $20 million. Sphere had one
fifth of these goods still in inventory at 31 March 2014. In March 2014 Penketh sold
 goods to Ventor for $15 million, all of which were still in inventory at 31 March 2014.
All sales to Sphere and Ventor had a mark-up on cost of 25%.
e) Penketh’s policy is to value the non-controlling interest at the date of acquisition at
its fair value. For this purpose, the share price of Sphere at that date (1 October
2013) is representative of the fair value of the shares held by the non-controlling
interest.
f) All items in the above statements of profit or loss and other comprehensive income
are deemed to accrue evenly over the year unless otherwise indicated.
Required:
(a) Calculate the consolidated goodwill as at 1 October 2013.
(b) Prepare the consolidated statement of profit or loss and other comprehensive income of
Penketh for the year ended 31 March 2014.

IFRS 3.1
On 1 January 2018 the issued share capital of Shumba Ltd consisted of 100 000 ordinary
shares with a market value of $18 each. On this date, Bear Ltd acquired a 70% interest in
Shumba Ltd (i.e. 70 000 ordinary shares), at a cost of $1 500 000. The fair value of the net
assets of Shumba Ltd amounted to $1 650 000. Shumba Ltd does not have any other equity
instruments in issue.
Required:
Calculate the value of the non-controlling interest using
i) Proportion of net assets.
ii) Fair value.

IFRS 3.2
On 1 January 2018, Bear Ltd acquired 80% of the equity interests in Shumba Ltd in exchange
for cash of $225 000. Because they needed to dispose of their investments in Shumba Ltd by
a specific date, the former owner of Shumba Ltd did not have sufficient time to market
Shumba Ltd to multiple potential buyers. The management of Bear Ltd initially measured
the separately recognizable identifiable assets acquired, and liabilities assumed and
determined that the identifiable assets are measured at $375 000 and the liabilities
measured at $75 000. Bear Ltd engaged an independent consultant who determined that
the fair value of the 20% non-controlling interest in Shumba Ltd was $63 000.

Assume that the fair value and consists only of present ownership interests.

Required:
Compute the value of goodwill.
IFRS 3.3
On 1 January 2018 Zihombe Ltd acquired a 55% interest in Kadiki Ltd from Vamwe Ltd. The
purchase price was settled as follows:-
a) A cash payment of $750 000 – As Zihombe did not have sufficient cash resources to
make the payment, a loan of $375 000 was incurred to finance the cash shortage.
Costs incurred to arrange the loan amounted to $1 500.
b) Zihombe Ltd also issued 30 000ordinary shares with a fair value of $15 each to
Vamwe Ltd. Costs incurred in issuing these shares amounted to $3 000.
In addition to the above, a payment of $15 000 was made to an attorney to draw up the
purchase agreement between Zihombe Ltd and Vamwe Ltd, while an amount of $1 200 was
to a valuer to determine a fair purchase price for the share in Kadiki Ltd.

Required:
Calculate the fair value of the consideration transferred.

IFRS 3.4
Zebra Ltd acquired a 15% interest in Kudu Ltd on1 January 2x11 for $75 000. The fair
value of this investment classified as at fair value through other comprehensive
income amounted to $90 000 at 31 December 2x11. On 30 June 2x12 when the fair
value of the 15% interest amounted to $97 500, Zebra Ltd acquired an additional
40% interest in Kudu Ltd for $270 000. Non-controlling interest is measured at fair
value, which amounted to $285 000 on 30 June 2x12. The fair value of the net assets
of Kudu Ltd amounted to $630 000 on 30 June 2012.

Required:

Calculate the amount of goodwill to be recognized in the above scenario.