Question 1

The following draft statement of financial position relate to Batman, Superman,Spiderman and
Otoman, all public limited companies as at 31 December 20X5

Batman Superman Spiderman Otoman

$’000 $’000 $’000 $’000
Non Current Asset
Property, plant and 20,250 15,750 12,500 5,500
equipment
Investment in Superman 4,250
Investment in Spiderman 1,500 2,500
Investment in Otoman 1,500
Current assets
Inventory 800 725 625 250
Trade receivables 1,200 530 550 120
Cash at bank and on hand 750 550 350 100
Total assets 30,250 20,055 14,025 5,970
Equity
Share capital@$1 each 8,000 3,000 2,500 1,000
Retained earnings 18,300 12,500 10,150 3,250
Non current liabilities 2,000 2500 375 1,000
Current liabilities 1,950 2,055 1,000 720
Total equity and liabilities 30,250 20,055 14,025 5,970

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

(i) Batman had acquired 2,550,000 $1 ordinary shares of Superman on 1 January 20X2 when the retained
earnings were $1,250,000.The fair value of the net assets of Superman was $4.45 million at 1 January
20X2. Any fair value adjustments related to the property that had been acquired by Superman on 1
January 20W2 with a useful life of 30 years. There have been no issue of ordinary shares in the Superman
since Batman acquired its interest

(ii) Batman had acquired 300,000 $1 ordinary shares of Otoman on 1 January 20X3 when the retained
earnings were $750,000.Batman is in position to exercise significant influence over Otoman and there
were no material differences between the book value and fair values of Otoman at that date

(iii) Batman and Superman had acquired their holdings in Spiderman on the same date as part of an attempt to
mask the true ownership of Spiderman. Batman acquired 600,000 $1 ordinary shares of Spiderman while
Superman acquired 1,000,000 shares on 1 January 20X4. At this date there was a credit balance of on the
retained earnings of Spiderman at $925,000. There was no revaluation surplus in the book of Spiderman
on 1 January 20X4. The fair value of the net assets of Spiderman at January 20X4 was not materially
different from their carrying values.

(iv) During 20x5, Superman had made intragroup sales to Batman of $750,000 making a profit of 20% on cost
and $225,000 of these goods were in inventories at 31 December 20X5

(v) An impairment test conducted at the year end did not reveal any impairment loss

(vi) It is the group policy to value the non controlling interest at fair value at the date of acquisition. The fair
value of the non controlling interest in Superman at 1 January 20X2 was $700,000. The fair value of non
controlling interest in Spiderman at 1 January 20X4 was $1.8million
Required:
Prepare the consolidated statement of financial position of Batman group on 31 December 20X5.
(15 marks)

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Question 2

The following draft statements of financial position relate to Green Hornet and Honey Bee, all public limited
companies, as at 31 May 2010.

Green Hornet Honey Bee

$m $m
Non-current assets:
Property, plant and equipment 300 40
Investment in Honey Bee 57
Current assets 113 30
470 70

Ordinary shares of $1 100 10

Share premium 50 20
Revaluation reserve 15
Retained profit 135 26
Non-current liabilities 60 4
Current liabilities 110 10
470 70

The following information is relevant to the preparation of the group financial statements:
(i) Green Hornet acquired the ordinary shares in Honey Bee as follows:
Date of Purchase Holdings acquired Purchase Fair value of net assets
consideration
$m $m
1 June 2007 30% 15 40
1 June 2008 50% 30 50
1 June 2009 10% 12 52
Fair value of one ordinary share of Honey Bee was $6 on 1 June 2008 and $7 on 1 June 2009.

(ii) Honey Bee has not issued any new shares since the acquisition on 1 June 2007 by Green Hornet. The
excess of the fair value of the net assets of Honey Bee over the carrying amount at the date of
acquisition is due to an increase in the fair value of Honey Bee’s non-depreciable land of $14 million at
1 June 2008. There has been no change in the value of non-depreciable land after that date.

(iii) $2 million of the inventories of Honey Bee were purchased from Green Hornet, which made a profit of
25% on cost.

(iv) On 1 June 2009, Green Hornet sold goods costing $13 million to Honey Bee for $19 million. Honey Bee
used the goods in constructing a machine which began service on 1 December 2009.

(v) Honey Bee is a cash-generating unit and at 31 May 2010, Green Hornet determined that the
recoverable amount of Honey Bee is $64 million.

(vii) Group policy is to depreciate plant and equipment over 10 years. Depreciation is calculated on a time-
apportioned basis.

(vii) It is the group policy to measure non-controlling interests at fair value (full goodwill method).

Required:

Prepare the consolidated statement of financial position of Green Hornet group on 31 May 2010.
(15 marks)

Question 3

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Gaseng, a public limited company, operates in the manufacturing sector. The draft statements of
comprehensive income and statements of changes in equity of the group companies are as follows at 31
December 2010:

Statements of Comprehensive Income for the year ended 31 December 2010

Gaseng Layang Congkark
$m $m $m
Revenue 550.00 250.00 350.00
Cost of sales (300.00) (170.00) (200.00)
Gross profit 250.00 80.00 150.00
Other operating cost (90.00) (25.00) (70.00)
Profit before tax 160.00 55.00 80.00
Taxation (45.00) (10.00) (25.00)
Profit for the year 115.00 45.00 55.00
Other Comprehensive income 10.00 5.00 2.00
Total Comprehensive income 125.00 50.00 57.00

The Statement of Changes in Equity on page 5

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

1. On 1 July 2009, Gaseng acquired a 100% of the equity interests of Layang for a cash consideration of $350
million when the total ‘provisional’ fair value of $325 million. At the same time, the retained earnings and
revaluation reserves were $50 million and $5 million respectively. The above provisional amount were
estimated including all fair value adjustment on property, plant and equipment and contingent liabilities.

At the time of the business combination, Layang had a contingent liability with a fair value of $50 million.
At 31 December 2009, the contingent liability met the recognition criteria of IAS 37 ‘Provisions,
Contingent Liabilities and Contingent Assets’ and the revised estimate of this liability was $40 million. The
accountant of Layang is yet to account for this revised liability.

However, Gaseng had not completed the valuation of an element of property, plant and equipment of
Layang at 1 July 2009 and the valuation was not completed by 31 December 2009. The valuation was
received on 31 January 2010 and the excess of the fair value over the provisional value at the date of
acquisition was estimated at $10 million. The asset had a useful economic life of 10 years at 1 July 2009 on
time- apportioned basis.

On 1 October 2010, Gaseng disposed of 60% of its equity interest in Layang for a consideration of $390
million. The remaining equity interest was fair valued at $260 million and the disposal proceeds had been
accounted into bank and the cost of investment in Layang. Gaseng could still exert significant influence
after the disposal of his interest.

2. On 1 July 2009, Gaseng had acquired a 100% interest in Congkark, a public limited company, for a cash
consideration of $300 million. Congkark’s identifiable net assets at 1 July 2009 were fair valued at $280
million with the retained earnings and revaluation reserves were $100 million and $5 million respectively.
On 31 December 2010, Gaseng disposed of 30% of the equity of Congkark for $150 million. The only
accounting entry made in Gaseng’s financial statements was to increase cash and reduce the cost of the
investment in Congkark.

3. Gaseng sold Congkark goods for $50 million during the year end and $25 million of these goods are
included in the inventory of Glove at 31 December 2010. The profit made by Gaseng on these sales was
$10 million. Profits for all companies are deemed to be accrued evenly throughout the year.

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4. There were no new issues of share capital for all the companies after 1 July 2009 and no necessary
impairment for the goodwill for the year ended 31 December 2010.

Required:
(a) Calculate the gain or loss arising on the disposal of the equity interest in Layang and Congkark.
(8 marks)
(b) Prepare a consolidated financial statements of Gaseng Group at 30 November 2009 in accordance
with International Financial Reporting Standards.
(7 marks)

(Total: 15 marks)

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 Statement of Changes in Equity for the year ended 31 December 2010
Gaseng Layang Congkark

Share Retained Reval. Share Retained Reval. Share Retained Reval.

Capital Earnings Reserves Total Capital Earnings Reserves Total Capital Earnings Reserves Total
$m $m $m $m $m $m $m $m $m $m $m $m
Balance at 1 January 2010 500.00 250.00 25.00 775.00 300.00 55.00 5.00 360.00 250.00 70.00 25.00 345.00
Dividends (70.00) (70.00)
Total comprehensive income
for the year 123.00 2.00 125.00 50.00 50.00 57.00 57.00
Balance at 31 December
2010 500.00 303.00 27.00 830.00 300.00 105.00 5.00 410.00 250.00 127.00 25.00 402.00

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Question 4

Butter is a company incorporated in Malaysia. The functional currency is the Ringgit Malaysia (RM)
and its financial year ends on 31 March each year. On 1 January 2010,Butter purchased on credit, a
machine costing S$60,000, from Cream a company based in Singapore.On 1 February 2010, Butter
paid S$20,000 as part settlement, with S$40,000 outstanding as at 31 March 2010.

The relevant exchange rates are:

1 March 2009 RM1 - S$0.50
1 January 2010 RM1 - S$0.40
1 February 2010 RM1 - S$0.38
31 March 2010 RM1 - S$0.35

Required:
Show the necessary computations to record the above transactions in the books of Butter as at 31
March 2010.
(5 marks)

END OF QUESTION PAPER

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