ACCA P2 - Corporate Reporting - Innovative online … Revision Course...P2 ACCA Revision Course Workbook Q Groups Technique Video 10 - Mixed Groups The following draft statements of

P2 ACCA Revision Course Workbook Q

ACCA P2 - Corporate Reporting

Revision Course Workbook


Groups Technique Video 01 - Sale of Shares

Illustration 1Inter purchased 70% of the shares in Milan several years ago. At that time goodwill of $80,000 arose. The net assets of Milan are currently $100,000 and the NCI is $18,000.

I. Calculate the gain arising on disposal if Inter sells it’s entire holding for $350,000.

II. Calculate the gain arising on disposal if Inter sells 30% for $250,000 and the fair value of the residual value is $30,000

Illustration 2For several years Jeremy has owned 70% of Richard. The net assets of Richard at this time are $250,000. The NCI is $68,000 and the gross goodwill is $200,000.

Jeremy has just sold 15% to take the holding to 55% for consideration of $150,000. Calculate the difference arising that will be taken to equity.


Groups Technique Video 02/03 - Vertical Groups & Group SOCI



Groups Technique Video 04 - More Group SOCI



Groups Technique Video 05 & 06 - SFP & Purchase of Shares

Illustration 1Vic purchased 10% of the shares in Bob several years ago. The investment cost $17,000 and Vic currently carries the investment at cost in the accounts. Vic has subsequently purchased 45% of the shares in Bob for $120,000. The net assets of Bob have a fair value of $60,000 and the fair value of the original investment is $45,000. The fair value of the NCI is $90,000.

Calculate the gross goodwill arising on the acquisition of Bob.

Illustration 2A parent has owned 90% of a subsidiary for a long period of time. The NCI in the subsidiary is currently measured at $300,000.

I. The parent acquires all of the remaining shares for consideration of $250,000.

II. The parent acquires 3% of the shares for $200,000 reducing the NCI to 7%.

What is the difference taken to equity in both situations?




Groups Technique Video 07 - More SFP









Groups Technique Video 10 - Mixed GroupsThe following draft statements of financial position relate to Red, a public limited company, Don, a public limited company, and Tel, a public limited company, as at 30 November:

It is the group’s policy to value the non-controlling interest at fair value.

The following information is relevant to the preparation of the group financial statements:

(i) Red had acquired 80% of the ordinary share capital of Don on 1 December three years ago, when the retained earnings of Don were $100m. The fair value of the non-

Red Don Tel

Non Current Assets

Tangible 1,230 505 256

Investment in Don 640

Investment in Tel 160 100

2030 605 256

Current Assets

Inventory 300 135 65

Receivables 240 105 49

Cash 90 50 80

630 290 194

2660 895 450

Equity

Share Capital 1,500 500 200

Share Premium 300 100 50

Revaluation Reserve 70

Ret. Earnings 625 200 60

2425 800 380

Non Current Liabilities 135 25 20

Current Liabilities 100 70 50

Total Equity & Liabilities 2660 895 450


controlling interest was $154m at acquisition. The fair value of the net assets of Don was $710m at that date. Any fair value adjustments related to inventory and these had been realised by the current year end. There had been no new issues of shares in the group since the current group structure was created.

(ii) Red and Don had acquired their holdings in Tel on the same date as part of an attempt to mask the true ownership of Tel. Rod acquired 40% and Don acquired 25% of the ordinary share capital of Tel two years ago. The fair value of the non-controlling interest in Tel was $149m at acquisition. The retained earnings of Tel on that date were $50m and those of Don were $150m. There was no revaluation reserve in the booksof Tel at acquisition. The fair values of the net assets of Tel at acquisition were not materially different from their carrying values.

(iii) The group operates in the pharmaceutical industry and incurs a significant amount of

expenditure on the development of products. These costs were formerly written off to the income statement as incurred but then reinstated when the related products were brought into commercial use. The reinstated costs are shown as ‘Development Inventory’. The costs do not meet the development criteria in IAS 38, Intangible Assets for classification as intangibles and it is unlikely that the net cash inflows from these products will be in excess of the development costs. In the current year, Don has included $20m of these costs in inventory.

(iv) Don had purchased a significant amount of new production equipment early in the year. The cost before trade discount of this equipment was $50m. The trade discount of $6m was taken to the income statement. Depreciation is charged on the straight-line basis over a six-year period.

(v) The policy of the group is now to state tangible non-current assets at depreciated historical cost. The group changed from the revaluation model to the cost model under IAS 16, Property, Plant and Equipment at the current year start and restated all of its tangible non-current assets to historical cost in that year except for the tangible non-current assets of Tel. These had been revalued by the directors of Tel on the first day of the current year. The values were incorporated in the financial records creating a revaluation reserve of $70m.

(vi)The tangible non-current assets of Tel were originally purchased on 1 December two years before the current year end, at a cost of $300 million. The assets are depreciated over six years on the straight-line basis. The group does not make an annual transfer from revaluation reserves to the retained earnings in respect of the excess depreciation charged on revalued tangible non-current assets. There were no additions or disposals of the tangible non-current assets of Tel for the two years to the current year end.

(vi) The goodwill resultant from the Don acquisition was impairment tested at the first and second year end after acquisition and again at the current year end. The first and second impairment reviews revealed no impairment. However, the current review identified a recoverable value of $809m for Don. There has been no impairment in Tel’s goodwill since acquisition.

RequiredPrepare a consolidated statement of financial position of the Red Group as at 30 November.


Groups Technique Video 11 - FX Groups



Groups Technique Video 12 - Cash Flow Statements




Section B Video 02 - IFRS 8


Section B Video 03 - IAS 19

The appropriate discount rate is 5%.

Required

Show the treatment for the Pension Plan under IAS 19 to 31 October 2007.





Required

Show the treatment for the PPE under IFRS.




Required

Discuss the correct treatment under IFRS





Required

Discuss the correct treatment under IFRS.






Required

Discuss the correct treatment under IFRS.

Required

Discuss, with calculations as appropriate, the correct treatment under IFRS.





Required

Discuss, with calculations as appropriate, the correct treatment under IFRS.

Documents

ACCA P2 - Corporate Reporting - Innovative online … Revision Course...P2 ACCA Revision Course Workbook Q Groups Technique Video 10 - Mixed Groups The following draft statements of