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    Investment Type Date of Investment Investee Shareholding Goodwill/ (Bargain Purchase) On Acquisition (Rs. in Million)

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    James Martin
    The document provides information about Shifa Limited's (SL) investments in various companies as of December 31, 2019 and the financial statements of those companies. It also includes additional information that needs to be considered to prepare a revised consolidated statement of financial position of SL and its subsidiaries. Some of the key details are: - SL has investments in 4 companies (LA, LB, LC, FD) ranging from 55-90% ownership - Additional adjustments are needed for items like investment property rent, contingent liabilities, purchase consideration, intercompany sales, currency exchange rates - Information is also provided about Long Life Equity Fund, a mutual fund, including income/expense details and unit transactions for the year ended

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    Investment Type Date of Investment Investee Shareholding Goodwill/ (Bargain Purchase) On Acquisition (Rs. in Million)

    Uploaded by

    James Martin
    34 views2 pages
    The document provides information about Shifa Limited's (SL) investments in various companies as of December 31, 2019 and the financial statements of those companies. It also includes additional information that needs to be considered to prepare a revised consolidated statement of financial position of SL and its subsidiaries. Some of the key details are: - SL has investments in 4 companies (LA, LB, LC, FD) ranging from 55-90% ownership - Additional adjustments are needed for items like investment property rent, contingent liabilities, purchase consideration, intercompany sales, currency exchange rates - Information is also provided about Long Life Equity Fund, a mutual fund, including income/expense details and unit transactions for the year ended

    Original Title

    Consolidation Question

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    The document provides information about Shifa Limited's (SL) investments in various companies as of December 31, 2019 and the financial statements of those companies. It also includes additional information that needs to be considered to prepare a revised consolidated statement of financial position of SL and its subsidiaries. Some of the key details are: - SL has investments in 4 companies (LA, LB, LC, FD) ranging from 55-90% ownership - Additional adjustments are needed for items like investment property rent, contingent liabilities, purchase consideration, intercompany sales, currency exchange rates - Information is also provided about Long Life Equity Fund, a mutual fund, including income/expense details and unit transactions for the year ended

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    34 views2 pages

    Investment Type Date of Investment Investee Shareholding Goodwill/ (Bargain Purchase) On Acquisition (Rs. in Million)

    Uploaded by

    James Martin
    The document provides information about Shifa Limited's (SL) investments in various companies as of December 31, 2019 and the financial statements of those companies. It also includes additional information that needs to be considered to prepare a revised consolidated statement of financial position of SL and its subsidiaries. Some of the key details are: - SL has investments in 4 companies (LA, LB, LC, FD) ranging from 55-90% ownership - Additional adjustments are needed for items like investment property rent, contingent liabilities, purchase consideration, intercompany sales, currency exchange rates - Information is also provided about Long Life Equity Fund, a mutual fund, including income/expense details and unit transactions for the year ended

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    of 2

    Advanced Accounting and Financial Reporting Page 4 of 5

    Q.4 Shifa Limited (SL) has investment in following companies:

    Goodwill/ (Bargain
    Investment Date of
    Investee Shareholding purchase) on acquisition
    type investment
    (Rs. in million)
    1-Jan-2015 LA 55% 130
    1-Jan-2019 LB 60% 220
    Local
    1-Apr-2019 LC 90% (60)
    31-Dec-2019 LA 20% ?
    Foreign 1-May-2019 FD 70% ?

    A draft consolidated statement of financial position of SL and its local subsidiaries as on


    31 December 2019 is as under:

    Assets Rs. in million Equity and liabilities Rs. in million


    Property, plant and equipment 14,200 Share capital 6,000
    Goodwill 350 Group reserves 6,745
    Investment property at fair value 200 Non-controlling interest 2,315
    Investment at cost: Liabilities 13,360
    FD (CNY 100 million) 2,000
    LA (20% investment) 120
    Current assets 11,550
    28,420 28,420

    The effects of the following have not been considered while preparing the above statement
    of financial position:
    (i) Investment property represents a warehouse owned by SL and rented out to LB on
    1 July 2019 for 9 months at a rent of Rs. 2 million per month. Upto 30 June 2019, the
    warehouse was rented out to other tenants. Carrying value and remaining useful life
    of the warehouse on 1 July 2019 was Rs. 180 million and 15 years respectively. On
    31 December 2019, rent of 2 months was not paid by LB.
    (ii) A contingent liability of Rs. 150 million as disclosed in LB’s financial statements was
    not included by SL in the net assets of LB at the acquisition date. SL's legal advisor
    had at that time estimated that LB would be liable to pay Rs. 40 million to settle the
    claim.
    As at 31 December 2019, it was still appearing as contingent liability in LB's financial
    statements while SL's legal advisor revised its estimate to Rs. 60 million to settle the
    claim.
    (iii) While calculating bargain purchase for LC, a purchase consideration of
    Rs. 121 million, payable in cash on 31 March 2021 was not considered. Applicable
    discount rate is 10% per annum.
    (iv) LC which deals in office equipment, sold equipment to LB on 1 July 2019 for
    Rs. 70 million at cost plus 40%. LB depreciates this equipment over 5 years.
    (v) On the date of additional investment of 20% in LA, the net assets of LA other than
    goodwill were amounted to Rs. 700 million.

    For consolidation of FD, the following information is available:


    (i) FD is registered in China and its functional currency is Chinese Yuan (CNY). On the
    date of acquisition, FD’s retained earnings were CNY 20 million. Fair value of its net
    assets was equal to their book value, except for an intangible asset whose fair value
    was higher than its carrying value by CNY 15 million. Its remaining useful life at the
    date of acquisition was estimated at 10 years
    Advanced Accounting and Financial Reporting Page 5 of 5

    (ii) FD’s statement of financial position as on 31 December 2019 is as under:

    CNY CNY
    Assets Equity and liabilities
    in million in million
    Property, plant and equipment 100 Share capital 60
    Intangible assets 40 Retained earnings 42
    Investment property at fair value 10 Liabilities 138
    Current assets 90
    240 240

    (iii) The exchange rates per CNY are as follows:

    Average for Average for


    1-May-2019 31-Dec-2019
    May-Dec 2019 2019
    Rs. 20 Rs. 24 Rs. 23 Rs. 22

    SL values non-controlling interest at its proportionate share of the fair value of the
    subsidiaries' net identifiable assets.

    Required:
    Prepare revised consolidated statement of financial position of SL as on 31 December 2019
    in accordance with the requirements of IFRSs. (25)

    Q.5 Following information is available from the records of Long Life Equity Fund (an open-end
    mutual fund) for the year ended 30 June 2020:

    (i) Undistributed income as at 1 July 2019 comprised of realised income and unrealised
    loss of Rs. 269 million and Rs. 12 million respectively.
    (ii) Total net assets at 1 July 2019 amounted to Rs. 9,690 million.
    (iii) Allocation of net income for the year is as follows:
    Rs. in million
    Total comprehensive income 364
    Income already paid on units redeemed (85)
    279

    (iv) Accounting income available for distribution only relates to capital gains.
    (v) Final distribution of Rs. 255 million i.e. @ 5% for the year ended 30 June 2019 was
    made during the year.
    (vi) Details of issuance and redemption of units during the year are as follows:
    Issuance Redemption
    Units in million 660 750

    ----------- Rs. in million -----------


    Capital value 12,606 (14,250)
    Element of income / (loss) 120 (144)
    12,726 (14,394)

    (vii) Unrealized income included in undistributed income as at 30 June 2020 amounted to


    Rs. 7 million.

    Required:
    Prepare a statement of movement in unit holders’ fund for the year ended 30 June 2020.
    (Ignore disclosure of comparative figures and net assets value per unit) (12)

    (THE END)

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