Online Exam (Financial Reporting)

Online Exam (Financial
Reporting)

Table of Contents
SECTION A.....................................................................................................................................3
Question 1....................................................................................................................................3
Question 2....................................................................................................................................6
SECTION B.....................................................................................................................................8
Question 4....................................................................................................................................8
Question 5....................................................................................................................................9

SECTION A
Question 1
a.
Solution to Question 1
Step 1
Group structure
Parent 70%
NCI 30%
Step 2
Calculate the consideration transferred £000
Cash 220,000
Contingent consideration 20,000
Deferred consideration (200m x 0.83) 166,000
Consideration transferred 406,000
Dr Investment 186,000
Cr Deferred consideration 166,000
Cr Contingent consideration 20,000
Step 3
Calculate Fair value of net assets at the date of acquisition and at the reporting date.
FV of Net Assets FV of Net Assets
01-04-19 31-03-20
£000 £000
Share capital 100,000 100,000
Retained earnings 24,000 55,000
Fair value adjustment for land (4000 - 5000) (1,000) (1,000)
Fair value adjustment-buildings (10,000 -12,000) (2,000) (2,000)
Reduced depreciation for buildings (-
2000/20)
100
Fair value adjustment-plant (30000-20000) 10,000 10,000
Additional
depreciation
(2,000)
131,000 160,100
Calculate the post acquisition profit of Mane £000
Fair value of Mane assets at the reporting
date
160,100
Fair value of Mane assets at the date of acquisition (131,000)

Post acquisition profit/loss 29,100
This will be shared between the group and the NCI as follows:
£000
Group (70%) 20,370
NCI (30%) 8,730
29,100
Step 4: Calculate the goodwill at the date of acquisition and at the reporting date
£000
Consideration transferred 406,000
Fair value of NCI (30% x 200m x 2) 120,000
526,000
Fair value of net assets at acquisition date (from step 2) (131,000)
Goodwill arising on acquisition 395,000
Step 5
Calculate the NCI at the reporting date £000
Fair value of NCI at the date of acquisition 120,000
Add NCI' share of the post acquisition profit of Beta 8,730
NCI at the reporting date 128,730
Step 6
Calculate the consolidated retained earnings £000
Alpha's retained earnings 153,000
Unrealised profit on goods sold to Trent (30% x 5m x
20%)
(300)
Add group's share of Associate's profit (30% x(55000-30000) 7,500
Add group's share of the post acquisition loss of
Mane
20,370
Decrease in contingent consideration 5,000
Interest on deferred consideration (10% x166,000) (16,600)
168,970
Step 7: Investment in Associate £000
Cost of investment in Associate (Note 4) 40,000
Share of Associate's post acquisition
profit
7,500
Less unrealised profit on goods sold to Associate (300)
47,200
Alpha group
Consolidated Statement of Financial Position at 31 March £000 £000