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 $ 000 Non Current Asset Property, plant and equipment Investment in Superman Investment in Spiderman Investment in Otoman Current assets Inventory Trade receivables Cash at bank and on hand Total assets Equity Share capital@$1 each Retained earnings Non current liabilities Current liabilities Total equity and liabilities 20,250 4,250 1,500 1,500 800 1,200 750 30,250 8,000 18,300 2,000 1,950 30,250 Superman $ 000 15,750 Spiderman $ 000 12,500 Otoman $ 000 5,500

2,500

725 530 550 20,055 3,000 12,500 2500 2,055 20,055

625 550 350 14,025 2,500 10,150 375 1,000 14,025

250 120 100 5,970 1,000 3,250 1,000 720 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 $m Non-current assets: Property, plant and equipment Investment in Honey Bee Current assets 300 57 113 470 100 50 15 135 60 110 470 Honey Bee $m 40 30 70 10 20 26 4 10 70

Ordinary shares of $1 Share premium Revaluation reserve Retained profit Non-current liabilities Current liabilities

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. $2 million of the inventories of Honey Bee were purchased from Green Hornet, which made a profit of 25% on cost. 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. 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. Group policy is to depreciate plant and equipment over 10 years. Depreciation is calculated on a timeapportioned basis. It is the group policy to measure non-controlling interests at fair value (full goodwill method).

(iii)

(iv)

(v)

(vii)

(vii)

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

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Question 3 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 $m Revenue Cost of sales Gross profit Other operating cost Profit before tax Taxation Profit for the year Other Comprehensive income Total Comprehensive income 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 valu ed 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. 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. 550.00 (300.00) 250.00 (90.00) 160.00 (45.00) 115.00 10.00 125.00 Layang $m 250.00 (170.00) 80.00 (25.00) 55.00 (10.00) 45.00 5.00 50.00 Congkark $m 350.00 (200.00) 150.00 (70.00) 80.00 (25.00) 55.00 2.00 57.00

3.

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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 Share Capital $m Balance at 1 January 2010 Dividends Total comprehensive income for the year Balance at 31 December 2010 500.00 Retained Earnings $m 250.00 (70.00) 123.00 500.00 303.00 2.00 27.00 Reval. Reserves $m 25.00 Share Capital $m 300.00 Retained Earnings $m 55.00 Layang Reval. Reserves $m 5.00 Share Capital $m 250.00 Retained Earnings $m 70.00 Congkark Reval. Reserves $m 25.00

Total $m 775.00 (70.00) 125.00 830.00

Total $m 360.00

Total $m 345.00

50.00 300.00 105.00 5.00

50.00 410.00 250.00

57.00 127.00 25.00

57.00 402.00

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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 1 January 2010 RM1 1 February 2010 RM1 31 March 2010 RM1 -

S$0.50 S$0.40 S$0.38 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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