CI-9: The following draft statements of financial position relate to Glove, Body and Fit, all

public limited companies, as at 31 May 20X7:

Glove Body Fit
Rs m Rs m Rs m
Assets
Non-current assets
Property, plant and equipment 260 20 26
Investment in Body 60 - -
Investment in Fit - 30 -
Available for sale investments 10 - -
Current assets 65 29 20
Total Assets 395 79 46

Ordinary shares 150 40 20

Other reserves 30 5 8
Retained earnings 135 25 10
Total Equity 315 70 38

Non-current liabilities 45 2 3
Current liabilities 35 7 5
395 79 46

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

(i) Glove acquired 80% of the ordinary shares of Body on 1 June 20X5 when Body's other
reserves were Rs 4 million and retained earnings were Rs 10 million. The fair value of the
net assets of Body was Rs 60 million at 1 June 20X5. Body acquired 70% of the ordinary
shares of Fit on 1 June 20X5 when the other reserves of Fit were Rs 8 million and retained
earnings were Rs 6 million. The fair value of the net assets of Fit at that date was Rs 39
million. The excess of the fair value over the net assets of Body and Fit is due to an increase
in the value of non-depreciable land of the companies. There have been no issue of ordinary
shares in the group since 1 June 20X5.

(ii) Body owns several trade names which are highly regarded in the market place. Body has
invested a significant amount in marketing these trade names and has expensed the costs.
None of the trade names has been acquired externally and, therefore, the costs have not
been capitalised in the statement of financial position of Body. On the acquisition of Body by
Glove, a firm of valuation experts valued the trade names at Rs 5 million and this valuation
had been taken into account by Glove when offering Rs 60 million for the investment in
Body. The valuation of the trade names is not included in the fair value of the net assets of
Body above. Group policy is to amortise intangible assets over ten years.

(iii) On 31 May 20X7, Glove acquired plant with a fair value of Rs 6 million. In exchange for
the plant, the supplier received land, which was currently not in use, from Glove. The land
had a carrying value of Rs 4 million and an open market value of Rs 7 million. In the financial
statements at 31 May 20X7, Glove had made a transfer of Rs 4 million from land to plant in
respect of this transaction.
(iv) Goodwill has been tested for impairment at 31 May 20X6 and 31 May 20X7 and no
impairment loss occurred.

(v) Ignore any taxation effects.

Required:

Prepare the consolidated statement of financial position of the Glove Group at 31 May 20X7
in accordance with International Financial Reporting Standards (IFRSs).

CI-10: The following draft statements of financial position relate to Rod, a public limited
company, Reel, a public limited company, and Line, a public limited company, as at 30
November 20X2.
Rod Reel Line
Rs m Rs m Rs m
Non-current assets
Property, plant and equipment 1,230 505 256
Investment in Reel 640 - -
Investment in Line 160 100 -
Current assets
Inventory 300 135 65
Trade receivables 240 105 49
Cash at bank and in hand 90 50 80
Total Assets 2,660 895 450

Capital and reserves

Share capital 1,500 500 200
Share premium 300 100 50
Revaluation reserves - - 70
Retained earnings 625 200 60
2,425 800 380

Non-current liabilities 135 25 20

Current liabilities 100 70 50
2,660 895 450

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

(i) Rod had acquired eighty percent of the ordinary share capital of Reel on 1 December
20W9 when the retained earnings of Reel were Rs 100 million. The fair value of the net
assets of Reel was Rs 710 million at 1 December 20W9. Any fair value adjustment related to
net current assets and these net current assets had been realised by 30 November 20X2.
There had been no new issue of shares in the group since the current group structure.

(ii) Rod and Reel had acquired their holdings in Line on the same date as part of an attempt
to mask the true ownership of Line. Rod acquired forty percent and Reel acquired twenty-
five percent of the ordinary share capital of Line on 1 December 20X0. The retained
earnings of Line on that date were Rs 50 million and those of Reel were Rs 150 million.
There was no revaluation reserve in the books of Line on 1 December 20X0. The fair values
of the net assets of Line at 1 December 20X0 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 profit
or loss 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
no meet the 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 development cost.
In the current year, Reel has included Rs 20 million of these cost in inventory. Of these costs
Rs 5 million relates to expenditure on a product written off in periods prior to 1 December
20W9. Commercial sales of this product written off in periods prior to 1 December 20W9.
Commercial sales of this product had commenced during the current period. The accountant
now wishes to ensure that the financial statements comply strictly with IFRSs as regards this
matter.

(iv) Reel had purchased a significant amount of new production equipment during the year.
The cost before trade discount of this equipment was Rs 50 million. The trade discount of Rs
6 million was recognised in profit or loss. Depreciation is charged on the straight line basis
over a six year period.

(v) The policy of the group is now to state property, plant and equipment (PPE) at
depreciated historical cost. The group changed from the revaluation model to the cost model
under IAS 16 Property, plant and equipment in the year ended 30 November 20X2 and
restated all of its PPE to historical cost in that year except for the PPE of Line which had
been revalued by the directors of Line on 1 December 20X1. The values were incorporated
in the financial records creating a revaluation reserve of Rs 70 million. The PPE of Line were
originally purchased on 1 December 20X0 at a cost of Rs 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 PPE. There were no additions or disposals of the PPE of
Line for the two years ended 30 November 20X2.

Required:

Prepare a consolidated statement of financial position of the Rod Group as at 30 November

20X2 in accordance with the standards of the International Accounting Standards Board.

CI-11: Statement of financial position for three companies for the year ended 31 December
2012.
A Ltd B Ltd C Ltd
Rs million Rs million Rs million
Net assets 2,850 800 500
Investment in “B” Ltd 800 - -
Investment in “C” Ltd (150) - -
3,500 800 500

Equity
Share capital 2,500 500 300
Retained earnings 1,000 300 200
3,500 800 500
Following additional information is relevant:

(i) “A” Ltd acquired 60% shares in “B” Ltd by paying Rs 800 million at 1 January 2011
when retained earnings of “B” Ltd were Rs 200 million.
(ii) “A” acquired 80% shares in “C” Ltd by paying Rs 450 million at 1 January 2011 when
retained earnings of “C” Ltd were Rs 100 million.
(iii) Profit of “B” Ltd and “C” Ltd evenly accrued after acquisition.

Required: Prepare consolidated statement of financial position of the Group for the year
ended 31 December 2012 under all of the following independent situation.

(a) “A” Ltd disposed 25% shares of “C” Ltd at 30 June 2012 at Rs 600 million.

(b) “A” Ltd disposed 40% shares of “C” Ltd at 30 June 2012 at Rs 600 million. At that
date fair value of remaining shares was Rs 280.

(c) “A” Ltd disposed 70% shares of “C” Ltd at 30 June 2012 at Rs 600. At that date fair
value of remaining shares was Rs 90 million.

“A” Ltd disposed all shares of “C” Ltd at 30 June 2012 at Rs 600 million.

CI-12: Lateral, a public limited company, acquired two subsidiary companies, Think and
Plank, both public limited companies, The details of the acquisitions are as follows:

Retained Share capital

earnings at acquired Rs Fair value of net
acquisition Rs 1 shares Rs assets at
Subsidiary Date of acquisition m m acquisition Rs m
Think 1 November 20X3 150 200 400
Plank 1 November 20X3 210 300 800

The draft statements of financial position as at 31 October 20X5 are:

Lateral Think Plank

Assets
Non-current assets
Property, plant and equipment 700 390 780
Investment in Think 380 - -
Investment in Plank 340 - -
Other investments 30 - -
1,450 390 780
Current assets
Inventories 200 185 90
Trade receivables 170 80 100
Cash and cash equivalents 40 30 50
Non current asset (held for sale) - 15 -
410 310 240

Total Assets 1,860 700 1,020

 Equity and liabilities
Share Capital (Rs 1 each) 400 250 500
Retained earnings 850 280 290
Total Equity 1,250 530 790

Non-current liabilities 250 60 80

Current liabilities 360 110 150
Total equity and liabilities 1,860 700 1,020

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

(i) There have been no new issue of shares in the group since 1 November 20X3 and the fair
value adjustment have not been included in the subsidiaries' financial records.

(ii) Any increase in the fair values of the net assets over their carrying values at acquisition is
attributable to plant and equipment. Plant and equipment is depreciated at 20% per annum
on the reducing balance basis.

(iii) Think sold plant and equipment to Lateral on 12 November 20X5. The transaction was
completed at an agreed price of Rs 15 million after selling cost. The transaction complies
with the condition in IFRS 5 Non-current assets held for sale and discontinued operations for
disclosure as assets held for sale. The plant and equipment had been revalued at fair value
less cost to sell in the individual account of Think. At 1 November 20X4, this plant and
equipment had a carrying value of Rs 10 million and no depreciation on these assets has
been charged for the year ended 31 October 20X5.

(iv) Goodwill arising on the acquisition of the subsidiaries was impairment tested on 31
October 20X4 and 31 October 20X5 in accordance with IAS 36 impairment of assets. On 31
October 20X4 an impairment loss of Rs 28 million was recognised for Plank. Plank is cash
generating unit in its own right. At 31 October 20X5, the impairment loss of Rs 28 million had
partially reversed, and the company proposed to write back to goodwill the reversal of Rs 12
million. The goodwill arising on the acquisition of Think was not impaired at 31 October 20X4
and 31 October 20X5.

(v) On 31 October 20X5, after accounting for the results of the impairment test, Lateral sold
100 million shares in Plank for Rs 180 million. Lateral still maintains significant influence over
Plank after the disposal of the shares. The receipt of the sale proceeds has been recorded in
the cash book and as a reduction in the carrying value of the cost of the investment in the
subsidiary. Goodwill associated with the shares sold is to be measured on the basis of the
proportion of shares disposed of.

Required:

(a) calculate the gain or loss that would be recorded in the group statement of
comprehensive income on the sale of the shares in Plank.
(b) Prepare a consolidated statement of financial position as at 31 October 20X5 for the
Lateral Group in accordance with International Financial Reporting Standards.