CHAPTER 6
SEPARATE FINANCIAL STATEMENTS (IAS – 27)
Introduction
IAS 27 Separate Financial Statements contains accounting and disclosure requirements for
investments in subsidiaries, joint ventures and associates when an entity prepares separate
financial statements. The Standard requires an entity preparing separate financial
statements to account for those investments either at cost, or in accordance with IFRS 9
Financial Instruments, or using the equity method.
Definitions
Separate financial statements
Separate financial statements are those presented by a parent (i.e. an investor with control
of a subsidiary) or an investor with joint control of, or significant influence over, an investee,
an entity in which the entity could elect, subject to the requirements in this Standard, to
account for its investments are accounted for in subsidiaries, joint ventures and associates
either at cost, or in accordance with IFRS 9 Financial Instruments, or using the equity
method as described in IAS 28 Investments in Associates and Joint Ventures.
Who is required to present Separate Financial Statements
a)
An entity may present separate financial statements in addition to consolidated
financial statements or economic entity financial statements.
b)
The entities those are exempt from preparing consolidated financial statements
under IFRS 10 or economic entity financial statements under IAS 28.
c)
An investment entity exempt from preparing consolidated or economic entity
financial statements will only prepare separate financial statements.
Preparation of separate financial statements
Separate financial statements shall be prepared in accordance with all applicable IFRSs,
except as provided hereunder: When an entity prepares separate financial statements, it shall account for investments in
subsidiaries, joint ventures and associates either:
(a)
at cost, or;
(b)
in accordance with IFRS 9.; or
(c)
using the equity method as described in IAS 28.
The entity shall apply the same accounting for each category of investments. Investments
accounted for at cost or using the equity method shall be accounted for in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations when they are
classified as held for sale or for distribution (or included in a disposal group that is classified
as held for sale or for distribution). The measurement of investments accounted for in
accordance with IFRS 9 is not changed in such circumstances.
Dividends
From a subsidiary, a joint venture or an associate are recognized in the separate financial
statements of an entity when entity’s right to receive the dividend is established. The
dividend is recognized in profit or loss unless the entity elects to use the equity method, in
which case the dividend is recognized as a reduction from the carrying amount of the
investment.
Page 1 of 27
CONSOLIDATION OF ASSOCIATED COMPANY AND JV
IAS – 28
Objective
The objective of this Standard is to prescribe the accounting for investments in associates
and to set out the requirements for the application of the equity method when accounting
for investments in associates and joint ventures.
Scope
This Standard shall be applied by all entities that are investors with joint control of, or
significant influence over, an investee.
Definitions (Not given in previous chapters)
The following terms are used in this Standard with the meanings specified: An associate is an entity over which the investor has significant influence.
The equity method is a method of accounting whereby the investment is initially recognized
at cost and adjusted thereafter for the post-acquisition change in the investor’s share of
net assets of the investee. The profit or loss of the investor includes the investor’s share of the
profit or loss of the investee and its share of other comprehensive income.
A joint arrangement is an arrangement of which two or more parties have joint control.
Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require the unanimous consent of the
parties sharing control.
A joint venture is a joint arrangement whereby the parties that have joint control of the
arrangement have rights to the net assets of the arrangement.
A joint venturer is a party to a joint venture that has joint control of that joint venture.
Significant influence is the power to participate in the financial and operating policy
decisions of the investee but is not control or joint control over those policies. Investments of
20% to 50% in voting power of companies lead to existence of significant influence. The
significant influence by an investor is usually evidenced in one or more of the following
ways: a)
Representation on the board of directors or equivalent governing body of the
investee.
b)
Participating in policy making process, including participation in decisions about
dividends or other distributions.
c)
Material transactions between the investor and the investee
d)
Interchange of managerial personnel; or
e)
Provision of essential technical information.
The existence of potential voting rights which are currently exercisable is also considered
when assessing significant influence.
Accounting of Associate and Joint venture
An Associate or joint venture and should be accounted for in consolidated financial
statement
using
equity
method;
i.e. investment is
Initially recorded at cost;
a) Adjusted for post acquisition change in net assets (investor share); Or post acquisition
profits/Losses (investor share);
b) The profit or loss of the investor includes the investor’s share of the profit or loss of the
investee and its share of other comprehensive income.
c) Dividend paid or distributions made will reduce the investment.
Page 2 of 27
d) On acquisition any difference between the cost of investment and investor’s share of
net fair value of associate’s identifiable assets, liabilities and contingent liabilities is
accounted for in accordance with IFRS-3.
• Goodwill relating to an associate is included in the carrying value of investment
• Any excess of the investor’s share of net fair value of the associate’s assets, liabilities
and contingent liabilities over the cost of investment is excluded from the carrying
value of investment and is included in the income statement of the year of
acquisition.
f)
Adjustments in investor’s share of profit or loss after acquisition are made in respect
of depreciation based on Fair Value.
g)
If different reporting dates, adjust the effect of significant events between reporting
dates;
h)
The investor’s financial statements shall be prepared using uniform accounting
policies for like transactions and events in similar circumstances.
i)
If the associate or the joint venture has cumulative preference shares then take the
group share in profits after preference dividend irrespective of the fact that the
associated company has declared or not.
j)
If the investor’s share of losses exceeds or equals its interest in associate or joint
venture, the investor will discontinue the recognition of further losses. Additional
losses can only be recognized if there exist any legal or constructive obligation
k)
Impairment test will not be applied on goodwill under IAS-36 but on the entire
amount of investment. After application of the equity method, including recognizing
the associate’s or joint venture’s losses, the entity applies IAS 39 to determine
whether it is necessary to recognize any additional impairment loss with respect to its
net investment in the associate or joint venture.
Transaction between group and associate
Item
Treatment
a)
Trading
between
group
and The profits or losses resulting from upassociate
stream or down-stream transactions
between an investor and associated or
the joint venture are recognized in the
investor’s financial statements only to the
extent of un-related investor’s interest in
associate or joint venture. The investors’
share in the associate‘s profit and losses
resulting from these transactions is
eliminated.
b)
Loans between associates or joint 1)
These
should
be
disclosed
ventures and the group
separately, but:
• If long term, they may appear in
the same balance sheet section
as “investment in associates or
joint venture”
• Otherwise they should appear
as current assets or liabilities.
2)
Loans to and from should not be
netted off.
c)
Receivables and payables arising 1)
Include under respective current
from trading transactions with
assets or liabilities without netting
associates or joint ventures
off.
2)
Disclose separately if material.
An investment in an associate or a joint venture shall be accounted for using the equity
method except when:
Page 3 of 27
1)
There is an evidence that the investment is acquired and held exclusively with a
view to its disposal within twelve months from acquisition date(Then apply IFRS-5).
2)
The exception in IFRS 10, allowing a parent that also has an investment in an
associate or joint venture not to present consolidated financial statements, applies;
or
3)
All of the following apply:
a. The investor is a wholly-owned subsidiary its other owners do not object if the
investor does not apply the equity method;
b. The investor’s debt or equity instruments are not traded in a public market
c. The investor did not file its financial statements with a securities commission, and
d. The ultimate parent of the investor produces consolidated financial statements.
EXCEPTION
When an investment in an associate or a joint venture is held by, or is held indirectly
through, an entity that is a venture capital organization, or a mutual fund, unit trust and
similar entities including investment-linked insurance funds, the entity may elect to measure
investments in those associates and joint ventures at fair value through profit or loss in
accordance with IFRS 9.
When an entity has an investment in an associate, a portion of which is held indirectly
through a venture capital organization, or a mutual fund, unit trust and similar entities
including investment-linked insurance funds, the entity may elect to measure that portion of
the investment in the associate at fair value through profit or loss in accordance with IFRS 9
regardless of whether the venture capital organization, or the mutual fund, unit trust and
similar entities including investment-linked insurance funds, has significant influence over
that portion of the investment. If the entity makes that election, the entity shall apply the
equity method to any remaining portion of its investment in an associate that is not held
through a venture capital organization, or a mutual fund, unit trust and similar entities
including investment-linked insurance funds.
Classification as held for sale
An entity shall apply IFRS 5 to an investment, or a portion of an investment, in an associate
or a joint venture that meets the criteria to be classified as held for sale. Any retained
portion of an investment in an associate or a joint venture that has not been classified as
held for sale shall be accounted for using the equity method until disposal of the portion
that is classified as held for sale takes place. After the disposal takes place, an entity shall
account for any retained interest in the associate or joint venture in accordance with IFRS 9
unless the retained interest continues to be an associate or a joint venture, in which case
the entity uses the equity method.
When an investment or a portion of an investment, in an associate or a joint venture
previously classified as held for sale no longer meets the criteria to be so classified, it shall
be accounted for using the equity method retrospectively as from the date of its
classification as held for sale. Financial statements for the periods since classification as
held for sale shall be amended accordingly.
Discontinuing the use of the equity method
An entity shall discontinue the use of the equity method from the date when its investment
ceases to be an associate or a joint venture as follows:
(a)
If the investment becomes a subsidiary, the entity shall account for its investment in
accordance with IFRS 3 Business Combinations and IFRS 10.
(b)
If the retained interest in the former associate or joint venture is a financial asset,
the entity shall measure the retained interest at fair value. The fair value of the
retained interest shall be regarded as its fair value on initial recognition as a
financial asset in accordance with IFRS 9. The entity shall recognize in profit or loss
any difference between:
(i) the fair value of any retained interest and any proceeds from disposing of a part
interest in the associate or joint venture; and
Page 4 of 27
(ii) the carrying amount of the investment at the date the equity method was
discontinued.
(c)
When an entity discontinues the use of the equity method, the entity shall account
for all amounts previously recognized in other comprehensive income in relation to
that investment on the same basis as would have been required if the investee had
directly disposed of the related assets or liabilities.
PREVIOUS GAINS/LOSSES RECOGNIZED IN OCI
Therefore, if a gain or loss previously recognized in other comprehensive income by the
investee would be reclassified to profit or loss on the disposal of the related assets or
liabilities, the entity reclassifies the gain or loss from equity to profit or loss (as a
reclassification adjustment) when the equity method is discontinued. For example, if an
associate or a joint venture has cumulative exchange differences relating to a foreign
operation and the entity discontinues the use of the equity method, the entity shall
reclassify to profit or loss the gain or loss that had previously been recognized in other
comprehensive income in relation to the foreign operation.
CHANGE IN STATUS FROM ASSOCIATE TO JV OR VICE VERSA
If an investment in an associate becomes an investment in a joint venture or an investment
in a joint venture becomes an investment in an associate, the entity continues to apply the
equity method and does not re-measure the retained interest.
CHANGES IN OWNERSHIP INTEREST
If an entity’s ownership interest in an associate or a joint venture is reduced, but the entity
continues to apply the equity method, the entity shall reclassify to profit or loss the
proportion of the gain or loss that had previously been recognized in other comprehensive
income relating to that reduction in ownership interest if that gain or loss would be required
to be reclassified to profit or loss on the disposal of the related assets or liabilities.
SUMMERY
The main accounting requirements can be summarized in the following flowchart.
E–1
Leigh acquired 30% of the ordinary share capital of Handy, a public limited company on
June 01 20x6. The purchase consideration was one million ordinary shares of Leigh which
had a market value of Rs.2.5 per share at that date and the fair value of the net assets of
Handy was Rs.9 million. The retained earnings of Handy were Rs. 4 million and other reserves
Page 5 of 27
of Handy were Rs. 3 million at that date. Leigh appointed two directors to the Board of
Handy. The summarized financial position of Handy at 31 May 20x7 is as follows: Rs. (m)
Share capital of Rs. 1 each
2
Other reserves
3
Retained earnings
5
Net assets
10
There had been no new issue of shares by Handy since the acquisition by Leigh and the
estimated recoverable amount of the net assets of Handy at 31 May 20x7 was Rs. 11 million.
Required: - Discuss with suitable computations how the above situation should be
accounted for under IAS -28 for the year ended May 31, 20x7?
E–2
A group has the following individual statement of financial positions at 31 December 20X8
H Ltd
A Ltd
H Ltd
A Ltd
Rs. 000s Rs. 000s
Rs. 000s Rs. 000s
Ordinary share capital
Share in A Ltd at cost (30%)
120
(Re. 1 shares)
1,000
200
Revenue reserves
750
150 Sundry net assets
1,630
600
Debentures
250
1,750
600
1,750
600
The investment in A Ltd was acquired on 1 January 20X7 when A Ltd’s revenue reserves
amounted to Rs. 60,000.
Required consolidated statement of financial position?
E–3
Otway, a public Limited Company, acquired a subsidiary, Holgarth, on July 01, 20x2 and an
associate, Betterbee, on January 01, 20x5. The details of the acquisition at the respective
dates are as follows: Investment
Ordinary
share
capital
Reserves
Fair value
of net
assets at
acquisition
Cost of
investment
Retained
Share
earnings
premium
Rs. 1each
Rs. (m)
Rs. (m)
Rs. (m)
Rs. (m)
Holgarth
400
160
140
800
765
Betterbee
220
269
83
652
203
The draft financial statements for the year ended June 30, 20x6 are: Statement of financial position as at June 30, 20x6
Otway
Holgarth
Rs. (m)
Rs. (m)
Non-current assets
Property, plant and equipment
1,012
920
Intangible assets
350
Investment in Holgarth
765
-Investment in Betterbee
203
-1,980
1,270
Current assets
Inventories
620
1,460
Trade receivables
950
529
Cash and cash equivalents
900
510
2,470
2,499
Page 6 of 27
Ordinary
share
capital
acquired
Rs. (m)
320
55
Betterbee
Rs. (m)
442
27
--469
214
330
45
589
Equity
Share capital
Share premium
Retained earnings
Current liabilities
Trade and other payables
Statement of comprehensive income for the year
ended June 30, 20x6
Revenue
Cost of sales
Gross profit
Distribution and administrative cost
Finance cost
Dividend income
Profit before tax
Income tax expense
Profit for the year
Dividend paid for the year
4,450
3,769
1,058
1,000
200
1,370
2,570
400
140
929
1,469
220
83
361
664
1,880
4,450
Otway
2,300
3,769
Holgarth
394
1,058
Betterbee
Rs. (m)
4,480
(2,690)
1,790
(620)
(50)
260
1,380
(330)
1,050
Rs. (m)
4,200
(2,940)
1,260
(290)
(80)
-890
(274)
616
Rs. (m)
1,460
(1,020)
440
(196)
(24)
-220
(72)
148
250
300
80
Retained earnings brought forward
570
613
293
Additional information:
a)
The Otway Group has the policy of measuring NCI at fair value at the date of
acquisition and Fair Value of NCI was Rs. 210 million at the date of acquisition.
b)
Neither Holgarth nor Betterbee had reserves other than retained earnings and share
premium at the date of acquisition. Neither issued new shares since acquisition.
c)
The fair value difference on the subsidiary relates to property, plant and equipment
being depreciated through cost of sales over the remaining useful life of 10 years
from the acquisition date. The fair value difference on the associate relates to a
piece of land which has not been sold since acquisition.
d)
Holgarth’s intangible assets include Rs. 87 million of training and marketing cost
incurred during the year ended June 30, 20x6. The directors of Holgarth believe that
these should be capitalized as they relate to the startup period of a new business
venture in Scotland, and intend to amortize the balance over five years from July 01,
20x6.
e)
During the year ended June 30, 20x6 Holgarth sold goods to Otway for Rs. 1,300
million. The company makes a profit of 30% on the selling price. Rs. 140 million of
these goods were held by Otway on June 30, 20x6 (Rs. 60 million on June 30, 20x5).
f)
Otway sold goods worth Rs. 1,000 to Betterbee during the year by charging 25%
margin on sales, 10% of the goods still remains unsold by Betterbee.
g)
Annual impairment tests have indicated impairment losses of Rs. 100 million relating
to the recognized goodwill of Holgarth including Rs. 25 million in the current year. The
Otway group recognizes impairment losses on goodwill in cost of sales. No
impairment losses to date have been necessary for the investment in Betterbee.
Required: -
Page 7 of 27
Prepare the statement of comprehensive income and statement of changes in equity for
the year ended June 30, 20x6 for the Otway Group and a statement of financial position at
that date?
Page 8 of 27
SOLUTIONS TO EXAMPLES
E–1
June 01, X6
Cost of investment [1 x 2.5)
Share of net assets (9 x 30%)
Bargain purchase gain
Rs. (m)
Cost on investment -restated
Cost of investment
Bargain purchase gain
Rs. (m)
2.50
(2.70)
(0.20)
2.50
0.20
2.70
May 31, 20x7
Carrying value of associate
Cost of investment
Share of post acquisition profit
[1 x 30%]
Carrying value of associate
2.70
0.30
May 31, 20x7
Impairment test
Carrying value of associate
Fair value [11 x 30%]
There is no impairment as the fair
value is greater than carrying value
3.00
3.30
3.00
E-2
H LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT DECEMBER 31, X8
Rs. (000)
Rs. (000)
Assets
Sundry net assets
Investment in associate
Cost of investment
Add: share of post acquisition profits
[150 – 60 ]x30%
1,630
120
27
147
1,777
Equity and liabilities
Equity –ordinary share capital
Revenue reserves
[750 + 27]
1,000
777
1,777
1,777
W-1
1-1-x7
Cost of investment
Share of net assets
[60+200]30%
Goodwill
120
(78)
42
Goodwill is not recognized separately from
cost of investment in associate
Page 9 of 27
E-3
OTWAY GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT JUNE 30, 20X6
Non-current assets
Property, plant and equipment (1,012+920+100-40)
Intangible assets (350-87)
Investment in associate
Goodwill (125+50-100)
Current assets
Inventories (620+1,460-42)
Trade receivables (950+529)
Cash and cash equivalents (900+510)
Equity
Share capital
Share premium
Consolidated retained earnings
Non controlling interest
Rs. (m)
Rs. (m)
1,992
263
219.75
75
2,549.75
2,038
1,479
1,410
1,000
200
1,786.75
Current liabilities
Trade and other payables (1,880+2,300)
7,380
(4,476)
2,904
(910)
(130)
1,864
(604)
1,260
30.75
1,290.75
Attributable to: Group
NCI
%
80
20
100
Holgarth
765
(640)
125
W-2 Goodwill-Group
Cost of investment
Share of net assets
Goodwill
Page 10 of 27
2,986.75
310
3,296.75
4,180
7,476.75
Otway Group
Consolidated statement of comprehensive income
For the year ended June 30, 20X6
Revenue
Cost of sales
Gross profit
Distribution and administrative cost
Finance cost
Profit before tax
Income tax expense
Profit for the year
Share of profit from associate
Net profit for the year
W-1 Group structure
Group
NCI
4,927
7,476.75
1,196.75
94
1,290.75
%
25
-25
Betterbee
203
(163)
40
W-3 Goodwill NCI
Fair value of NCI
Share of net assets
Goodwill
210
(160)
50
W-3 Fair value gain
Fair value of net assets
Share capital
Retained earnings
Share premium
800
400
160
140
700
100
Fair value gain
W-4 Opening retained earnings – Group
Parent company
Associated company
Subsidiary share of profit
652
220
269
83
572
80
570
6
264
840
W-5 opening retained earnings –Holgarth
Brought forward
Fair value gain
Extra depreciation
Impairment loss on goodwill
URP on opening stock
Group
NCI
W-6 Investment in associate
Cost of investment
Share of profit b/ f profit (293-269)x.25
URP on stock
Share of profit for the year
Dividend received
Pre
160
100
260
208
52
Post
453
(30)
(75)
(18)
330
264
66
203
6
(6.25)
37
(20)
219.75
W-7 NCI opening
Fair value at date of acquisition
Post acquisition profit share b/ f
210
66
276
W-7
Revenue
Cost of sales
Gross profit
Distribution and administrative cost
Finance cost
Dividend income
Profit before tax
Income tax expense
Profit for the year
Share of profit from associate (37-6.25)
Otway
Holgarth Adjustment Consolidated
Rs. (m)
Rs. (m)
4,480
4,200
(1,300)
7,380
(2,690)
(2,940)
1,154
(4,476)
1,790
1,260
(146)
2,904
(620)
(290)
(910)
(50)
(80)
(130)
260
-(260)
1,380
890
(406)
1,864
(330)
(274)
(604)
1,050
616
(406)
1,260
30.75
30.75
Page 11 of 27
Profit or loss for the year
1,050
616
(375.25)
Attributable to: Group
NCI
W-8 Adjusting entries
Cost of sale
Opening retained earnings (Post)
Property, plant and equipment
Property, plant and equipment
Retained earnings -pre
Cost of sales
Intangible assets
Sales
Cost of sales
Cost of sales
Closing stock
Opening retained –post
Cost of sales
Profit and loss account/CRE
Investment in associate
(1000x.25)x10%x.25
Opening retained earnings-post
Cost of sales
Goodwill
Profit or loss account
NCI
Dividend
Profit or loss account
Investment in associate
W-9 Adjusted profit
Profit after tax
Extra depreciation
Impairment loss on goodwill
Intangible asset
URP on closing stock
URP on opening stock
1,290.75
1,196.75
94
1,290.75
10
30
40
100
100
87
87
1,300
1,300
42
42
18
18
6.25
6.25
75
25
100
240
60
300
20
20
616
(10)
(25)
(87)
(42)
18
470
94
NCI share @20%
OTWAY GROUP
CONSOLIDATED STATEMENT OF CHANGED IN EQUITY
FOR THE YEAR ENDED JUNE 30, 20X6
Ordinary
Share
Consolidated Total
NCI
Total
share
retained
capital
premium earnings
B/f
1,000
200
840
2,040
276
2,316
Total comp.
1,196.75 1,196.75
94 1,290.75
income
Dividends
(250)
(250)
(60)
(310)
C/ d
1,000
200
1,786.75 2,986.75
310 3,296.75
Page 12 of 27
Past Papers
Q-1
Golden Limited (GL) is a listed company and has held shares in two companies, Yellow
Limited (YL) and Black Limited (BL), since July 1, 2006. The details of acquisition of shares in
these companies are as follows:
(A) GL acquired 18 million shares in YL at par, when YL’s reserves were Rs. 24
million. The acquisition was made by issuing four shares in GL for every five
shares in YL. The market price of GL’s shares at July 1, 2006 was Rs. 20 per
share. A fair value exercise was carried out for YL’s assets and liabilities at the
time of its acquisition with the following results:
Land
Machines
Investments
Book Value Fair Value
Rupees in million
170
192
25
45
3
6
The remaining life of machine on acquisition was 5 years. The fair values of the
assets have not been accounted for in YL’s financial statements.
(B) 6 million shares in BL were acquired for Rs. 12 per share in cash. At the date of
acquisition, the reserves of BL stood at Rs. 40 million.
The summarized income statement of the three companies for the year ended June
30, 2008 is as follows:
GL
YL
BL
Rupees in million
Sales
875
350
200
(567) (206) (244)
Cost of sales
Gross profit / (loss)
308
144
(44)
Selling expenses
(33)
(11)
(15)
Administrative expenses
(63)
(40)
(16)
Interest expenses
(30)
(22)
(15)
65
Other income
Profit/(loss) before tax
247
71
(90)
(73)
(15)
8
Income tax
Profit/(loss) for the period
174
56
(82)
The following relevant information is available:
(i)
The share capital and reserves as at July 1, 2007 were as follows:
GL
YL
BL
Rupees in million
Ordinary share capital of Rs. 10 each 600 200 150
Reserves
652 231 108
The share capital of all companies have remained unchanged since their
incorporation.
(ii) During the year, GL sold goods amounting to Rs. 40 million to YL. The sales were
made at a markup of 25% on cost. 30% of these goods were still in the
inventories of YL at June 30, 2008.
(iii) GL manufactures a component used by BL. During the year, GL sold these
components amounting to Rs. 20 million to BL. Transfers are made at cost plus
15%. BL held Rs. 11.5 million of these components in inventories at June 30, 2008.
(iv) All assets are depreciated on straight line method.
(v) Other income includes dividend received from YL on April 15, 2008.
Page 13 of 27
(vi) During the year, YL paid 20% cash dividend to its ordinary shareholders.
(vii) An impairment test was carried out on June 30, 2008 for the goodwill of YL and
investments in BL, appearing in the consolidated financial statements. The test
indicated that:
• goodwill of YL was impaired by 20%;
• due to recent losses, the fair value of investment in BL has been reduced to
Rs.40 million.
No such impairment was required in previous years.
Required:
Prepare, in a format suitable for inclusion in the annual report, a consolidated income
statement for the year ended June 30, 2008.
(22)
Q-2
T Limited, a public listed company, entered into an expansion program on July 1, 2004. On
that date, the company purchased 80% of the share capital of Alpha Ltd and 40% of the
share capital of Beta Ltd. For Alpha, T Ltd paid total consideration of Rs.25 million. This was
settled by signing a loan agreement of Rs.20 million carrying interest at 7% payable semiannually and the balance by issuing 200,000 ordinary shares of T Limited. Shares of Beta Ltd.
were acquired by a 1 for 1 share exchange. The market value of T Limited’s share at the
date of acquisition was Rs 25. The yearend of all the companies is June 30.
Extracts from their balance sheets at June 30, 2005 are as under:
T Ltd Alpha Ltd Beta Ltd
Rs 000
Rs 000
Rs 000
Fixed Assets:
Land
5,000
4,000
3,500
Building
8,000
6,000
5,500
Plant
22,400
14,000
12,000
Current Assets:
Stocks
Trade debts
Cash
10,000
9,200
Nil
9,000
7,000
3,000
16,200
2,800
4,300
Share Capital and Reserves:
Ordinary shares of Rs.10 each 10,000
Un-appropriated profits
20,000
20,000
15,000
25,000
4,500
Current liabilities:
Creditors
12,000
5,300
13,600
Running finance
3,000
Nil
Nil
Taxation
9,600
2,700
1,200
The following further information is available:
• T Ltd. has not recorded the acquisition of the above investments nor the issue
of new shares at the time of preparing the above balance sheet. However
interest on loan of Rs.20 million has already been account for.
• The book values of the assets of Alpha Ltd. and Beta Ltd., at the date of
acquisition, were considered to be a reasonable approximation of their fair
values with the exception of fixed assets of Alpha Ltd. These were considered
to have the following fair values.
Land
Rs. 5.0 million
Plant
Rs.16.0 million
The plant had a remaining life of 4 years at the time of acquisition.
• The profits of Alpha Ltd. and Beta Ltd., for the year ended June 30, 2005, as
Page 14 of 27
reported in their financial statements, were Rs.8 million and Rs. 2 million
respectively. No dividends have been paid by any of the companies during
the year.
Required: Prepare the Consolidated Balance Sheet of T Ltd. as at June 30, 2005?
Q-3
Qudsia Limited (QL) has investments in two companies as detailed below:
Manto Limited (ML)
• On 1 January 2010, QL acquired 40 million ordinary shares in ML, when its retained
earnings were Rs. 150 million.
• The fair value of ML’s net assets on the acquisition date was equal to their carrying
amounts.
Hali Limited (HL)
• On 30 November 2012, QL acquired 16 million ordinary shares in HL, when its retained
earnings stood at Rs. 224 million.
• The purchase consideration was made up of:
o Rs. 190 million in cash, paid on acquisition; and
o 4 million shares in QL. At the date of acquisition, QL’s shares were being traded at
Rs. 15 per share but the price had risen to Rs. 16 per share by the time the shares
were issued on 1 January 2013.
• The fair value of the net assets of HL on the date of acquisition by QL was equal to their
carrying amounts, except a building whose fair value exceeded its carrying amount by
Rs. 28 million. The building had a remaining useful life of seven years on 30 November
2012.
The draft summarised statements of financial position of the three companies on 31
December 2012 are shown below:
QL
ML HL
Rs. in million
Assets
Property, plant and equipment
Investment in ML
Investment in HL
Current assets
5,000 550 500
630
190
5,480 400 350
11,300 950 850
Equity and liabilities
Ordinary share capital (Rs.10 each)
Retained earnings
Current liabilities
6,000 500 400
2,900 100 240
2,400 350 210
11,300 950 850
The following additional information is available:
(i)
QL considers ML as a cash-generating unit (CGU). As on 31 December 2012, the
recoverable amount of the CGU was estimated at Rs. 700 million.
(ii)
QL values the non-controlling interest at its proportionate share of the fair value of
the subsidiary’s net identifiable assets.
(iii)
On 1 October 2012, ML sold a machine to QL for Rs. 24 million. The machine had
been purchased on 1 October 2010 for Rs. 26 million. The machine was originally
assessed as having a useful life of ten years and that estimate has not changed.
(iv)
In December 2012, QL sold goods to HL at cost plus 30%. The amount invoiced was
Rs. 52 million. These goods remained unsold at year end and the invoiced amount
was also paid subsequent to the year end.
Required:
Prepare a consolidated statement of financial position for QL as on 31 December 2012 in
accordance with the requirements of International Financial Reporting Standards? (20)
Page 15 of 27
Q-4
On 1 October 2012, Alpha Industries Limited (AIL) held 15% and 35% equity in Beta (Private)
Limited and Delta (Private) Limited (DPL) respectively. The following balances, pertains to
the three companies as on the above date.
AIL
BPL
DPL
RS. In millions
Share capital (Rs. 100 each)
100
60
50
Retained earnings
35
30
15
Other comprehensive income – fair value reserve related to BPL
6
--Total equity
141
90
65
Non-current investment –BPL *(Cost Rs. 18 million)
Non-current investment –DPL **(Cost Rs. 40 million)
*
**
20
43
---
---
recorded as available for sale
recorded as investment in associate
On 1 April 2013, AIL acquired a further 55% equity in BPL when: a)
The fair value of the net assets of BPL was Rs. 100 million which was equal to their
carrying value; and
b)
The fair value of the 15% equity already held in BPL was Rs. 25 million.
The purchase considerations comprised of 150,000 shares in AIL which were issued on the
date of acquisition at their market value of Rs. 160 per share and Rs. 42 million payable in
cash on 31 March 2014. AIL uses discount rate of 12% for determining the present value of
its future assets and liabilities.
Other relevant information is as follows: a)
For the year ended 30 September 2013 the profits after tax of AIL, BPL and DPL were
Rs. 58 million, Rs. 40 million and Rs. 30 million respectively.
b)
AIL value non controlling interest at the acquisition date at its fair value which was
Rs. 32 million.
c)
AIL sold goods at Rs. 65 million to BPL on 1 July 2013. The sales were invoiced at 30%
above cost. 20% of these goods remained unsold as on 30 September 2013.
d)
DPL’s sales to AIL amounted to Rs. 70 million. DPL earns profit of 20% of sales value.
On 30 September 2013, inventory of AIL included Rs. 20 million in respect of such
goods.
e)
For the year ended 30 September 2012 AIL, BPL and DPL paid final cash dividend of
15%, 20% and 12% respectively.
Required: a)
Compute the amount of goodwill; retained earnings and investment in associate as
they would appear in the consolidated statement of financial position of AIL as at 30
September 2013, in accordance with IFRS (Ignore taxation)? (18)
b)
Describe how the investments as it would appear in the separate statement of
financial position of AIL as at 30 September 2013, in accordance with IFRS? (4)
Q-5
a)
On 1 October 2009 Sky Limited (SL) acquired 25% holding (2.5 million ordinary shares)
in Mars Limited (ML) for Rs. 900 million. On the date of acquisition, ML’s equity was as
follows:
b)
Rs. in million
Ordinary share capital (Rs. 100 each)
1,000
Share premium
150
Retained earnings
2,898
Page 16 of 27
12% cumulative preference share capital
200
c) On the above date, fair value of a building owned by ML exceeded its carrying
value by Rs. 12 million and its estimated useful life was 15 years. Fair values of all
other assets and liabilities of ML were equal to their carrying values.
Following additional information is available:
(i)
ML’s profit after tax for the year ended 30 September 2011 was Rs. 250 million (2010:
Rs. 240 million). Dividend received from ML amounted to Rs. 30 million (2010: nil).
(ii)
Cost of goods purchased from SL and included in ML’s closing inventory was Rs. 10
million (2010: Rs. 16 million). SL makes a profit of 20% on all sales.
(iii)
Applicable tax rate is 35% and 10% for business and dividend income respectively.
On 1 January 2011, SL acquired 70% holding (7 million ordinary shares) in Jupiter
Limited (JL) for Rs. 1,400 million. SL has been following a policy to account for
investments in associates using equity basis of accounting. Since SL is now required
to prepare consolidated financial statements, it needs to change its accounting
policy for investments in associates, for the purpose of preparation of its separate
financial statements, to comply with the requirements of International Financial
Reporting Standards.
Required:
Prepare the following notes (relevant portion only) for incorporation in the separate
financial statements of Sky Limited for the year ended 30 September 2011:
(a)
Change in accounting policy
(b)
Investments
(Show all the necessary disclosures and comparative figures in respect of the above, in
accordance with International Financial Reporting Standards.) (22 marks)
Q-6
In order to pursue expansion of its business, Parrot Limited (PL) has made the following
investments during the year ended 30 June 2012:
(a)
On 1 July 2011, PL acquired 20% shares of Goose Limited (GL), a listed company,
when GL’s retained earnings stood at Rs. 250 million and the fair value of its net
assets was Rs. 350 million. The purchase consideration was two million ordinary shares
of PL whose market value on the date of purchase was Rs. 33 per share. PL is in a
position to exercise significant influence in finalizing the financial and operational
policies of GL.
The summarized statement of financial position of GL at 30 June 2012 was as follows:
Rs. in million
100
280
380
380
Net assets
Recoverable amount of GL’s net assets at 30 June 2012 was Rs. 370 million. (06)
Costs incurred for development and promotion of a brand are enumerated below:
Rupees
800,000
(i)
Research on size of potential market
1,500,000
(ii)
Products designing
950,000
(iii)
Labour costs in refinement of products
(iv)
Development work undertaken to finalize the product design 11,000,000
18,000,000
(v)
Cost of upgrading the machine
600,000
(vi)
Staff training costs
3,400,000
(vii) Advertisement costs
(06)
Share capital (Rs. 10 each)
Retained earnings
(b)
Page 17 of 27
Required:
Discuss how the above investments/costs would be accounted for in the consolidated
financial statement for the year ended 30 June 2012.
Q-7
Opal Industries Limited (OIL) is a listed company. As at June 30, 2014 OIL has various
investments as detailed under: Company
Investment
Equity held
Cost
At the acquisition date
date
Share capital
Retained
(RS. 100
earnings
each)
Rs. In millions
AL
01-July-2012
30%
50
80
60
BL
31-Dec-2011
10%
8
70
40
GL
01-Jan-2014
65%
195
150
95
Information pertaining to profit and dividend of the investee companies is as follows: Company
Profit / (loss)
Final cash dividend for year
For the year ended
ended
2014
2013
2014
2013
Rs. (m)
Rs. (m)
AL
30
28
20%
16%
BL
(10)
14
-18%
GL
55
50
30%
15%
BL is a listed company and fair value of its shares as at June 30, 2014 was Rs. 110 per share
(2013 Rs. 160). OIL classifies investment in BL as available for sale.
AL and GL are private companies and market value of their shares is not available.
GL is the first subsidiary of OIL, since its incorporation. Following information pertains to OIL: 2013
2012
Rs. (m)
Rs. (m)
Share capital (Rs. 10 each)
2,875
2,500
Profit for the year
1,260
1,100
Closing retained earnings balance
850
465
Final dividend –
cash
25%
20%
Bonus issue
-15%
OIL’s profit for the year ended June 30, 2014 prior to taking effects of the transactions of its
investee companies was Rs. 1,450 million and it has announced a final cash dividend of
30%.
Required: Prepare following for inclusion in the first separate financial statements of OIL for the year
ended June 30, 2014 as required by the International Financial Reporting Standards.
a)
Movement in retained earnings for inclusion in statements of changes in equity; and
(06)
b)
Note on investments
(10)
(Show comparative figures and ignore taxation)
Page 18 of 27
SOLUTIONS TO PAST PAPERS
A–1
GOLDEN LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED JUNE 30, 2008
GL
YL
Adjustments Consolidated
Rs.(m)
Rs.(m)
Rs.(m) Rs.(m)
Sales
875
350
(40)
1,185.00
Cost of sales
(567)
(206)
24.42
(748.58)
Gross profit/(loss)
308
144
(15.58)
436.42
Selling expenses
(33)
(11)
(44.00)
Administrative expenses
(63)
(40)
(103.00)
Interest expense
(30)
(22)
(52.00)
Other income
65
-(36.00)
29.00
Share of loss from associate (W-3)
--(63.20)
(63.20)
Profit / (loss) before tax
247
71
(114.78)
203.22
Income tax
(73)
(15)
-(88.00)
Profit after tax
174
56
(114.78)
115.22
NCI [56-4]x10%
-(5.2)
-(5.20)
Profit attributable to owners of
50.80
(114.78)
110.02
174
parent
Workings
W-1 Group structure
YL
%
90
10
100
Group
NCI
W-2
Cost of control account
Cost of investment (18x4/5x20)
Share of net assets acquired
Share capital
Pre- acquisition reserves (24+45) x 90%
Goodwill
W-3
Investment in associate
Cost of investment (6x12)
Share of net assets [40+150]x40%
Bargain purchase gain
Restate cost of investment (72+4)
Share of brought forward profits [108-40]x40%
Share of loss of current year [82x40%]
Un-realized profit on intra group trading
[11.5x15/115]x40%
Carrying value of associate
Impairment loss
Fair value of associate
Share of loss from associate for the current year
Share of loss
Page 19 of 27
Rs. (m)
180.00
62.10
BL
%
40
40
Rs. (m)
288
242.10
45.90
72.00
(76.00)
(4.00)
76.00
27.20
(32.80)
(0.60)
69.80
(29.80)
40.00
(32.80)
Un-realized profit
Impairment loss
(0.60)
(29.80)
(63.20)
W-4 Extra depreciation
Fair value gain
Remaining useful life
W-5 Un-realized profit on closing stock
[40x30%x25/125]
W-6 Intra group dividend [20%200]x90%
W-7 Impairment loss on goodwill [45.90x20%]=9.18
W-8 adjusting entries
Sales
Cost of sales
Cost of sales
Closing stock
Cost of sales
Goodwill
Cost of sales
Plant
A–2
T Limited Group
Consolidated statement of financial position
As at June 30, 2005
Rs. (000)
Fixed assets
Land (9,000+1,000)
10,000
Building
14,000
Plant (36,400-2667+667)
34,400
Investment in associate
25,800
Goodwill
4,734
Current assets
Stock
19,000
Trade debtors
16,200
Cash
3,000
Total assets
Rs. 4
million/year
Rs. 20 (m)
5 years
Rs. 2.4
million
Rs. 36
40.00
40.00
2.40
2.40
9.18
9.18
4.00
4.00
Rs. (000)
88,934
38,200
127,134
Equity and Liabilities
Equity
Share capital (10,000+2,000+10,000)
Share premium (3,000+15,000)
Consolidated retained earnings
22,000
18,000
27,734
Non controlling interest
67,734
6,800
74,534
Non- current liabilities
Loan
20,000
Current liabilities
Creditors
Running finance
17,300
3,000
Page 20 of 27
Taxation
12,300
Total equity and liabilities
32,600
127,134
W-1 Group structure
Group
NCI
Alpha
%
80
20
100
W-2 Cost of investment
Alpha Limited
Loan notes
Share capital
Share premium
W-3 cost of investment in Associate
Share capital
Share premium
W-4 cost of control account
Cost of invest
Share of net assets
Share capital
Pre-acquisition reserves
Goodwill
Beta
%
40
-40
20,000
2,000
3,000
25,000
10,000
15,000
25,000
25,000
(16,000)
(4,266)
4,734
W-5 Non-controlling interest
Share capital
Pre-acquisition reserves
Post-acquisition reserves
W-6 Consolidated retained earnings
Parent company reserves
Associated company
Post-acquisition reserves
4,000
1,067
1,733
6,800
20,000
800
6,934
27,734
W-7 subsidiary reserves
Pre
7,000
(2,667)
1,000
Given
Fair value loss on plant
Fair value gain on land
Extra depreciation
Group share
Non-controlling interest
W-8 Investment in associate
Cost of investment
Share of post acquisition profit
W-9 Fair value loss on plant
Carrying value on the reporting date
Carrying value on the acquisition date
5,333
4,266
1,067
Post
8,000
--667
8,667
6,934
1,733
25,000
800
25,800
14,000
18,667
Page 21 of 27
(14,000x4/3)=18,667
Fair value at the acquisition date
16,000
W-10 Extra depreciation
2,667/4
A–3
(2,667)
667
QUDSIA LIMITED GROUP
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 31, 2012
Rs. (m)
Assets-noncurrent assets
Property, plant and equipment (5,550-3.10)
Goodwill (110 – 27.44)
Investment in associate
5,546.90
82.56
262.27
Current assets
Rs. (m)
5,891.73
5,880
11,771.73
Equity and liabilities
Equity –ordinary share capital
Share deposit money
Consolidated reserves
6,000
60.00
2,842.37
NCI
8,902.37
119.36
9,021.73
Current liabilities
2,750
W -1 Group structure
ML
%
80
20
100
ML
630
Group
NCI
W- 2 Cost of control a/c
Cost of investment
Share of net assets acquired
Share capital
Pre – acquisition reserves
11,771.73
HL
%
-40
40
400
120
520
110
Goodwill
W -3 Investment in associate
Cost of investment
Cash paid
Shares issued (4 x 15)
Share of net assets acquired
Share capital
Pre –acquisition reserves (224x40%)
Fair value gain (28 x 40%)
Bargain purchase gain
Re-stated cost of investment
Page 22 of 27
190
60
160.00
89.60
11.20
250.00
(260.80)
(10.80)
260.80
Share of post acquisition profits
[240 – 224 – {(28/7)x1/12}]x 40%
Un – realized profit on stocks
W – 4 Non controlling interest
Share capital
Pre – acquisition reserves
Post – acquisition reserves
W – 5 Consolidate retained earn
Balance
Bargain purchase gain on associate
Extra depreciation [(3.2/8)x3/12]
Post – acquisition reserves
Impairment loss on goodwill
Share of profit from associate
Un – realized profit on stocks
W – 6 Subsidiary retained earnings
Balance
Un – realized profit [24 – {(26/10)x2/10}]
Group share
NCI share
W – 7 Impairment test
Recoverable value
Carrying value of net assets
Share capital
Reserves
Goodwill (110 x 100/80)
Impairment loss
Loss to be recorded (34.30x80%)
W – 8 Un- realized profit on stocks
[52x30/130x40%]
6.27
(4.80)
100.00
30.00
(10.64)
119.36
2,900.00
10.80
0.10
(42.56)
(27.44)
6.27
(4.8)
2,842.37
Pre
150
150
120
30
Page 23 of 27
Post
(50)
(3.2)
(53.2)
(42.56)
(10.64)
700.00
500.00
96.80
596.80
137.50
734.30
34.30
27.44
4.8
A–4
a)
Goodwill, retained earnings and investment in associate
Goodwill
Rs. (m)
Cost of investment
Fair value of 15% already held investment
25.00
Cost of 55% purchased 01, April 2013
Share capital issued [150,000x160]
24.00
Deferred consideration [42x(1.12)^-1
37.50
Fair value of NCI
Share of net assets acquired
Share capital
Share of pre-acquisition reserves
[100+12-60]
Goodwill
1.47
262.27
60.00
40.00
Rs. (m)
86.50
32.00
118.50
(100.00)
18.50
Retained earnings
Debit
Rs. (m)
Balance brought forward-AIL
Realized gain on BPL
Gain on re-measurement of BPL
Profit for the year –AIL
Dividend for the year –AIL
Dividend from associate (50x12%)x.35
Share of profit from BPL (40+30-52)=18x70%
Share of profit from associate (30x35%)
Un-realized profit on closing stock
[65x20%x30/130]
Un-realized profit on closing stock
[20x20/100]x35%
Carried down balance
Investment in associate
Brought forward balance
Share of profit
Dividend from associate
b)
Credit
Rs. (m)
35.00
6.00
5.00
58.00
15.00
2.10
12.60
10.50
3.00
1.40
105.60
127.10
Rs. (m)
127.10
Rs. (m)
43.00
10.50
(2.10)
51.40
Values of investments in separate financial statements
Investment in subsidiary and associated company will be presented in separate
books at cost which is: Rs.
(m)
Cost of investment in BPL
86.50
Cost of investment in DPL
40.00
A–5
Sky Limited
Notes to the financial statements
For the year ended 30 September 2011
(a)
1.
1.1
Change in accounting policy
During the year the company has acquired 70% holding in Jupiter Limited on 1
January 2011. Consequently, the company has prepared the consolidated financial
statements along with its separate financial statements, for the first time for the year
ended 30 September 2011.
Investment in Mars Limited was accounted for using equity basis of accounting in
the financial statements for the year ended 30 September 2010. IAS 27 and 28
requires that investment in associates shall be accounted for in the investor's
separate financial statements either at cost or in accordance with IFRS 9 and IAS 39.
Accordingly, the company has changed its accounting policy for investment in
associate from equity basis of accounting to cost, in the separate financial
statements.
Effects of change in accounting policy
In accordance with requirements of IAS 8 "Accounting policies, changes in
accounting estimates and errors" this change in accounting policy has been
Page 24 of 27
accounted for with retrospective effect. Comparative information has been restated accordingly. The effects of the above change, on the financial statements
are as follows:
2011
2010
Rs. in million
Effect on Statement of Financial Position
Wl
Decrease in investment in the associated company
(194.92)
(168.35)
Decrease in deferred tax liability (2011: 5.34+2.66)
8.00
5.34
(186.92)
(163.01)
Effect on Statement of Comprehensive Income
Wl
Decrease in gain on acquisition of investment in the
(115.00)
associated company
Wl
Decrease in share of profit in the associated company
(56.57)
(53.35)
Increase in dividend income
30.00
(26.57)
(53.35)
Decrease in deferred tax expense at 10%
2.66
5.34
Net decrease in profit
(23.91)
(163.01)
As the investment in Mars Limited was made on 1 October 2009, there is no effect of such
change in accounting policy, prior to 1 October 2009. As a result, opening balance sheet
as at 1 October 2009 as required by IAS 1 "Presentation of Financial Statements" has not
been presented.
(b)
2.
Investment at cost
2011
2010
Description
Number of shares
7,000,000 -
Jupiter Limited - subsidiary
company
2,500,000 2,500,000 Mars Limited - associated
company
2010
(Restated
)
Rs. in million
1,400
-
2011
900
900
2,300
900
The company holds 70 % and 25% ownership interest in Jupiter Limited and Mars
Limited respectively.
WORKINGS
W1 Effects of change of accounting basis from equity to cost
Balance as at October 1, 2010 / Investment made during the year
Gain on acquisition of investment in associated company
{25%*(1,000+150+2,898+12)}-900
Dividend received from ML
Profit for the year, after tax, attributable to ordinary share holders 2011:
(250-(200xl2%))x25% 2010: (240-(200xl2%))x25%
Profit net of tax, on inter-company stock - opening & closing 2011:
0.52-(10x0.2x0.65x0.25) 2010: (16x0.2x0.65x0.25)
Depreciation on fair value exceeding carrying value (12/15) xO.65x0.25)
Page 25 of 27
2011
1,068.35
-
2010
900.00
115.00
(30.00)
56.50
54.00
0.20
(0.52)
(0.13)
56.57
(0.13)
53.35
Investment in associated company - equity basis of accounting
Investment in associated company - cost basis of accounting
Decrease in investment due to change in the basis of accounting
A–6
a)
July 01, 2011
Rs. (m)
Rs. (m)
Cost of investment [2 x33)
66.00
Share of net assets (350 x 20%)
(70.00)
Bargain purchase gain
(4.00)
Cost on investment -restated
Cost of investment
66.00
Bargain purchase gain
4.00
70.00
May 31, 20x7
Carrying value of associate
Cost of investment
70.00
Share of post acquisition profit
6.00
[30 x 20%]
Carrying value of associate
76.00
May 31, 20x7
Impairment test
Carrying value of associate
76.00
Fair value [370 x 20%]
(74.00)
Impairment loss
2.00
b)
1,094.92 1,068.35
900.00 900.00
194.92 168.35
Expenses out
Capitalized
Rs.
Rs.
Research cost
800,000
-Product designing
-1,500,000
Labor cost on refinement of products
950,000
-Development work to finalize product design
-11,000,000
Cost of upgrading the machine
-18,000,000
Staff training cost
600,000
-Advertisement costs
3,400,000
30,500,000
5,750,000
Out of total expenses to be capitalized Rs. 18,000,000 will be property, plant and equipment
and rest of the expense will be capitalized under IAS 38 as intangible assets.
A–7
Opal Industries Limited
Accounting treatment for various investments in first separate financial statements
In accordance with IAS 27, in separate financial statements, investment in subsidiaries, joint
ventures and associates should be accounted for either at cost or fair value in accordance
with IFRS 9.
As OIL is preparing its first IFRS separate financial statements for the year ended June 30,
2014, there is a change in accounting policy as investment in AL, an associate company,
would be treated in 2014 at cost as against the previous basis of equity accounting.
Accordingly, comparative figures would be restated to incorporate this change in
accounting policy.
i)
Opal Industries Limited
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Statement of changes in equity for the year ended June 30, 2014
Balance as at June 30, 2012
Profit for the year –restated
Final dividend for the year ended 30-06-12
Cash dividend @20% [2,500x20%]
Bonus issue @ 15% [2,500x15%]
Balance as June 30, 2013-restated
Profit for the year
Final cash dividend at 25% for the year ended 30-06-13
[2,875x25%]
Balance as at June 30, 2014
ii)
W-1
W-1
W-1
Retained
earnings
Rs. (m)
465.00
1,251.60
(500.00)
(375.00)
841.60
1,454.80
(718.75)
1,577.65
Opal Industries Limited
Notes to the financial statements for the year ended June 30, 2014
1- Long term investments:
2013
2014
Description
2014
2013
Number of shares
Rupees in millions
Subsidiary and associates-at cost
975,000
GL
195.00
-240,000
240,000
AL
50.00
50.00
Others-available for sale
70,000
70,000
BL
(70,000x110),
7.70
11.20
(70,000x160)
310,000 1,285,000
61.20
252.70
The company holds 65% and 30% and 10% interest in GL, AL and BL respectively.
OIL profit for the year after taking effect of investee companies: 2014
2013
Re-stated
Rs. in million
Profit for the year
1,450.00
1,260.00
AL- associated company:
Reversal of previously booked profit
(28x30%)
-(8.40)
Dividend for the year ended June 30, 2013 (80x30%x16%)
3.84
BL – Available for sale:
Dividend for the year ended June 30, 2013
(70x10%x18%)
1.26
Investment impairment (7.7 – 8) or (11.2-8)-(7.7-11.2)
(0.30)
1,251.60
1,454.80
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