SOLUTIONS TO IAS 21 EXAMPLES

E-1
Dr. Cr.
a) $ $
March-01 Equipment 200,000
Payable 200,000
(130,000/0.65)

August -25 Payable 200,000

Profit or loss account 60,000
Bank 260,000
(130,000/.5)
b)
Feb -27 Debtors 68,000
Sales 68,000
(68,000x7)=476,000 K

Feb -27 Cost of sales 46,000

Inventory 46,000

May -25 Bank 71,045

Debtors 68,000
Profit or loss 3,045
(476,000/6.7)=71,045
c)
Sep -02 Debtors 24,000
Sales 24,000
(24,000x2.224)=53,376

Dec -31 Profit or loss account 277

Debtors 277
(53,376/2.25)=23,723

Feb -07 Bank 23,147

Profit or loss account 576
Debtors 23,723
(53,376/2.306)=23,147
d)
May -25 Bank 284,000
Loan 284,000
(426,000/1.5)

Dec -31 Loan 47,333

Profit or loss account 47,333
(426,000/1.8)=236,667
E-2
Consolidated Statement of Financial Position
Assets $ (m) $ (m)
Non-current assets
Property, plant and equipment 366.52
Goodwill 8.00 374.52
Current assets (355 + 48.57 – 0.6) 402.97
777.49
Equity and liabilities
Equity
Ordinary share capital 60.00
Share premium 50.00
Consolidated retained earnings 363.04
Exchange gain 10.22 483.26
NCI 17.95
501.21
Non-current liabilities (30 + 13.57) 43.57
Current liabilities (205 + 32.71 – 5) 232.71
777.49

Consolidated Statement of Comprehensive Income

Memo Random Adj. Consolidated
Profit or loss account
Revenue 200 56.8 (6) 250.8
Cost of sales (120) (38.4) 3.4 (155)
Gross profit 80 18.4 (2.6) 95.8
Distribution expenses (30) (8.0) (38.0)
Operating profit 50 10.4 (2.6) 57.8
Interest income 4 4
Exchange gain -- 1.52 1.52
Interest expenses -- (0.8) (0.8)
Profit before tax 54 11.12 (2.6) 62.52
Tax (20) (3.6) (23.6)
Profit after tax 34 7.52 (2.6) 38.92
Other comprehensive income
Exchange gain on translation of foreign operation 11.49
Goodwill 1.60
13.09
Total Comprehensive Income 52.01
Profit attributable to:
Group 37.04
NCI 1.88 38.92
Total Comprehensive Income Attributable to: -
Group 47.26
NCI 4.75
52.01
 Consolidated Statement of Changes in Equity
O.S. Share CRE Ex-gain Total NCI Total
Capital premium
B /f 60 50 334 -- 444 -- 444
Subsidiary acquisition -- -- -- -- -- 13.2 13.2
Total comprehensive income -- -- 37.04 10.22 47.26 4.75 52.01
Dividend paid -- -- (8) -- (8) -- (8)
60 50 363.04 10.22 483.26 17.95 501.21
Working:
W-1 Group Structure %
Memo 75
NCI 25

W-2 Net assets of Random At Acquisition At Reporting Date

Share capital 32 32
Share premium 20 20
Retained earnings 80 95
Exchange gain on payable ((2.5 - 2.2) x 6) 00 1.8
Exchange gain on loan ((2.5 - 2.1) x 5) 00 2.0
132 168.8

W-3 Goodwill $
Cost of investment 48.00
NCI (25% x 132 ) / 2.5 13.20
61.20
Less: Fair value of net assets (132 / 2.5) 52.80
Goodwill 8.40
Add: Exchange gain on Goodwill
(8.4 x 2.5 / 2.1) - 8.4) 1.60
Goodwill before impairment 10.00

Less: Impairment loss (4.2 / 2.1) (2.00)

Goodwill at reporting date 8.00

W- 4 NCI
At date of acquisition ( 13.20 x 2.5 / 2.5) 13.20
Post-acquisition profit (168.8 - 132) x 25%) / 2.5 1.88
Share of translation exchange gain (11.49 x 25%) 2.87
17.95

W- 5 Consolidated retained earnings

Memo retained earnings 360.00
Unrealized profit on stock (0.60)
Post-acquisition profits of Random ( 7.52 x 75%) 5.64
Impairment on Goodwill (2.00)
363.04
Translation of foreign operation
Statement of Financial Position
Draft Adjustment Final Crowns Rate $
Assets
Non-current
Property, plant and equipment 146 146 2.1 69.52
Current assets 102 102 2.1 48.57
248 248 118.09
Liabilities
Non-current liabilities 41 (12.5) 28.5 2.1 13.57
Current liabilities 60 8.7 68.7 2.1 32.71
101 3.8 97.2 46.28
147 150.8 71.81
Equity
Ordinary share capital 32 32 2.5 12.8
Share premium 20 20 2.5 8.0
Retained earnings - pre 80 80 2.5 32.0
Retained earnings - post 15 3.8 18.8 2.5 7.52
Exchange gain -- 11.49
147 3.8 150.8 71.81
Statement of Comprehensive Income
Revenue 142 142 2.5 56.8
Cost of sales (96) (96) 2.5 (38.4)
Gross profit 46 46 18.4
Distribution expenses (20) (20) 2.5 (8.0)
Operating profit 26 26 10.4
Exchange gain 3.8 3.8 2.5 1.52
Interest expenses (2) (2) 2.5 (0.8)
Profit before tax 24 27.8 2.5 11.12
Tax (9.0) (9.0) 2.5 (3.6)
Profit after tax 15 3.8 18.8 7.52

SOLUTION TO PAST PAPERS

Q-1. ETACH GROUP
STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED ___________
Rs (000) Rs. (000)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 3,000
Adjustments for: -
Finance cost 1,000
Depreciation 1,600 2,600
Operating profit before working capital changes 5,600
(Increase)/decrease in current assets
Inventory (425)
Receivables (405)
Increase/(decrease) in current liabilities
Trade payables 235 (595)
Exchange gain 50
Cash generated from operations 5,055
Taxes paid (870)
Net cash inflow from operating activities 4,185
CASHFLOWS FROM OPERATING ACTIVITIES
Property, plant and equipment acquired (5,325)
Net cash out flows from investing activities (5,325)
CASHFLOWS FROM FINANCING ACTIVITIES
Finance cost paid (1,000)
Dividend paid (1,200)
Long term loans raised 3,000
Dividend to NCI (110) 690
Increase/(decrease) in cash and cash equivalent during the year (450)
Opening balance of cash and cash equivalent (2,500)
Closing balance of cash and cash equivalent (2,950)
W-1 Tax Dr. Cr.
B /f 850
Profit or loss account 1,000
Exchange loss 20
Cash 870
C /d 1,000
1,870 1,870

W-2 NCI
B /f 3,050
Profit or loss account 300
Exchange gain 60
Cash 110
C /d 3,300
3,410 3,410

W-3 Exchange gain

PPE 225
Inventory 75
Receivables 95
Cash 10
Profit for the year 50
Trade payable 65
Tax payable 20
Bank overdraft 60
Group 250
NCI 60
455 455
W-4 Property, plant and equipment
B /f 11,500
Exchange gain 225
Cash 5,325
Depreciation 1,600
C /d 13,850
15,450 15,450
W-5 Inventory
B /f 3,500
Exchange gain 75
Increase 425
4,000 4,000

W-5 Receivables
B /f 4,500
Exchange gain 95
Increase 405
5,000 5,000

W-6 Cash and cash equivalent

Opening Closing
Cash 500 600
Bank overdraft (3,000) (3,600)
Exchange gain (10)
Exchange loss 60
(2,500) (2,950)

Q-2 Consolidated Statement of Comprehensive Income

RTL FDL Adj. Consolidated
Revenue 1,000 568.75 (30) 1,538.75
Cost of sales (450) (341.25) 22.09 (769.16)
Gross profit 550 227.5 (7.91) 769.59
Selling & distribution expenses (250) (113.75) (25.26) (389.01)
Exchange gain -- 0.66 0.66
Interest expenses (25) (22.75) (47.75)
Profit before tax 275 91.66 (26.35) 333.48
Tax (100) (22.75) (122.75)
Profit after tax 175 68.91 (26.35 210.73
Other comprehensive income
Exchange gain on translation of foreign operation
{11x (23.50 - 22.00) + 2.88(23.5 - 22.75)} 18.68
Exchange gain on Goodwill 6.45
25.13
Total Comprehensive Income 235.86
Profit attributable to:
Group 191.08
 NCI 19.65 210.73
Total Comprehensive Income Attributable to: -
Group 210.62
NCI 25.25
235.86
Working:
W-1 Group Structure %
Memo 70
NCI 30

W-2 Net assets of FDL At Acquisition

FC Rs.
Share capital 5
Retained earnings 3
Fair value adjustment 3
11 x 22 = 242

W-3 Goodwill Rs.

Cost of investment (12 x 22) 264.0
NCI (30% x 11 x 22 ) 72.6
336.6
Less: Fair value of net assets 242
Goodwill 94.60
Add: Exchange gain on Goodwill
((94.60 x 23.5 / 22 ) - 94.60) 6.45
Goodwill before impairment 101.05
Less: Impairment loss (101.05 x 25%) (25.26)
Goodwill at reporting date 75.79

Translation of foreign operation

Statement of Comprehensive Income
Revenue 25 22.75 568.75
Cost of sales (15) 22.75 (341.25)
Gross profit 10 227.5
Selling & administration expenses (5) 22.75 (113.75)
Financial expenses (1) 22.75 (22.75)
Profit before tax 4 91.00
Tax (1) 22.75 (22.75)
Profit after tax 3 68.25