Advanced finanical reporting Assignment | Professional Writing Services

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Question 1

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Below are the statements of financial position for Elsa Plc, Anna Limited, Sven Limited and Olaf Co for the year ended 30 April 2020.

  Elsa   Anna   Sven   Olaf
  £000   £000   £000   R000
Non Current Assets              
Property, Plant and Equipment 27,950   11,150   3,500   45,000
Development Expenditure 2,500     275   2,000
Investments 3,000   1,650   250   500
  33,450   12,800   4,025   47,500
Current Assets              
Inventories 4,225   1,525   600   11,500
Trade and Other Receivables 7,315   2,338   875   15,000
Cash and Cash Equivalents 1,255    1,162   225   4,500
  12,795   5,025   1,700   31,000
Total Assets 46,245   17,825   5,725   78,500
Equity              
Ordinary Share Capital 7,500   2,000   625   15,000
Preference Share Capital 2,500      
Retained Earnings 9,290   7,050   1,600   6,000
  19,290   9,050   2,225   21,000
Non Current Liabilities              
Borrowings 12,500   4,000   1,200   18,000
Provisions 1,500   500   300  
  14,000   4,500   1,500   18,000
Current Liabilities              
Borrowings 2,500   1,000   450   2,500
Trade and Other Payables 8,455   2,525   1,300   25,000
Current Taxation 2,000   750   250   12,000
  12,955   4,275   2,000   39,500
               
Total Liabilities 26,955   8,775   3,500   57,500
Total Equity and Liabilities 46,245   17,825   5,725   78,500

 

Notes to the Statement of Financial Position

  1. Share Capital
  • All ordinary shares other than those in Olaf have a par value of 50 pence
  • All preference shares have a par value of £1 and the preference dividend rate on all preference shares is 6%
  • All preference shares are redeemable at par in 10 years time
  • Ordinary shares in Olaf have a par value of R1. Olaf is a company incorporated in Reenland and its accounts are denominated in Reenlandian Rand (R)

 

  1. Exchange Rates prevailing during the year
  • Average Rate for the year: £1 = R17.5
  • Opening Rate at 1 May 2019: £1 = R15
  • Closing Rate at 30 April 2020: £1 = R20

 

  • Elsa Plc
  • Elsa’s investments include an interest free loan to Olaf of £500,000 which is repayable in 10 years time. This loan was made to Olaf when the £:R exchange rate was £1 = R18 and the loan is still in Olaf’s books at this historical cost exchange rate
  • It is the group’s policy to value any non-controlling interests at their proportionate share of the fair value of the subsidiary’s identifiable net assets

 

 

 

 

 

  1. Anna Limited
  • Elsa purchased 3,200,000 ordinary shares and 100% of the preference shares in Anna Limited on 1 May 2019. The purchase consideration consisted of 2 shares in Elsa Plc and £1 in cash for every 4 shares in Anna. The double entry for the cash element of the transaction has been recorded in cash and in Elsa’s investments but the accountant has not recorded the number or value of shares issued nor the value of shares issued in Elsa’s investments. At the date of acquisition ONE share in Elsa was valued at £4.50
  • At the date of acquisition the retained earnings of Anna stood at £5,000,000
  • At the date of acquisition it was agreed that the book values of the assets and liabilities of Anna did not differ materially from the fair values for those assets and liabilities
  • Group policy is to capitalise development expenditure under the requirements of IAS38. Anna has a long-term development project in hand which at 30 April 2020 had incurred total expenditure of £1,200,000 all of which had been charged to the income statement in line with the UK accounting standard SSAP13 even though the criteria for capitalisation of this expenditure had been met under IAS38. Calculations indicate that the development expenditure incurred up to 30 April 2019 amounted to £1,050,000
  • Anna paid an interim dividend of £200,000 on 1 December 2019 and declared a final dividend of £350,000 on 28 April 2020
  • Half the preference dividend was paid on 31 October 2019 and the directors declared the final preference dividend on 28 April 2020
  • Elsa has taken credit for its share of the dividends from Anna in the statement of financial position above. All dividends receivable from Anna by Elsa are included in Trade and Other Receivables
  • All dividends payable are included in Trade and Other Payables
  1. Sven Limited
  • Elsa acquired 500,000 shares in Sven Limited on 1 January 2020 for £950,000
  • At 30 April 2019, the retained earnings of Sven stood at £1,300,000
  • At the date of acquisition it was agreed that the book values of the assets and liabilities of Sven did not differ materially from the fair values for those assets and liabilities
  • On 28 April 2020, Sven declared a final dividend for the year of 10 pence per share and paid an interim dividend of £40,000 on 1 December 2019
  • Elsa has not taken account of the dividend receivable from Sven in the statement of financial position above
  1. Olaf
  • Elsa paid £700,000 to acquire 28% of the shares in Olaf on 1 May 2019. On the same date Anna paid £1,600,000 to acquire 40% of the shares in Olaf
  • At 30 April 2019 Olaf’s retained earnings stood at R5,000,000
  • At the date of acquisition it was agreed that the fair value of Olaf’s buildings was R12,000,000 higher than book value. These buildings had an average remaining useful economic life of 30 years at the date of acquisition
  • Olaf sold goods to Elsa throughout the year to 30 April 2020 at cost plus a mark-up of 25%. At the year end, the goods purchased from Olaf, Elsa still held R1,000,000 of it. The directors have decided to calculate any provision for unrealised profit based on the closing exchange rate at the year end
  • Elsa sent Olaf a payment of £60,000 on 28 April 2020 to clear the current account balances between the two companies at the year end. Olaf received this payment on 10 May 2020 and has not taken account of this payment in its statement of financial position above
  • Olaf declared a final dividend for the year ended 30 April 2020 of R500,000 on 17 May 2020. Elsa and Anna have taken no account of this dividend in their statement of financial position above. The exchange rate at 17 May 2020 continued to be £1 = R20

 

vii) Goodwill

  • Positive goodwill is carried at cost and is reviewed annually for impairment
  • Negative goodwill is credited directly to retained earnings
  • An impairment review of goodwill had been carried out at the year end and had concluded that there had been no impairment of the goodwill associated with any of the investee companies

YOU ARE REQUIRED TO:

Prepare the group statement of financial position for Elsa Plc at 30 April 2020.

 

All your calculations should be made to the nearest £000.

 

TOTAL 60 MARKS

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