Small was incorporated in 1985 and prior to its acquisition by Big had built up its own customer base and local supplier network. This was not disturbed when Small became a subsidiary of Big as the directors of Big were anxious that the local expertise of the management of Small should be utilized as much as possible. Therefore all the day-to-day operational decisions regarding Small continued to be made by the existing management, with the directors of Big exercising 'arm's-length' strategic control.
The statement of financial positions of Big and Small at 31 March 2003 is given below. The statement of financial position of Small is prepared in florins, the functional currency for Small.

Notes to the statement of financial positions
Note 1 - Investment by Big in Small
On 1 April 1997, Big purchased 60 million shares in Small for 57 million florins. The accumulated profits of Small showed a balance of 20 million florins at that date. The accounting policies of Small are the same as those of Big except that Big revalues its land, whereas Small carries its land at historical cost. Small's land had been purchased on 1 April 1994. On 1 April 1997, the fair value of the land of Small was 6 million florins higher than its carrying value in the individual financial statements of that entity. By 31 March 2003, the difference between fair value and carrying value had risen to 11 million florins. Apart from this accounting policy difference, no other fair value adjustments were necessary when initially consolidating Small as a subsidiary.
Note 2 - Intra-group trading
On 6 March 2003, Big sold goods to Small at an invoiced price of $6 000 000, making a profit of 25% on cost. Small recorded these goods in inventory and payables using an exchange rate of 5 florins to $1 (there were minimal fluctuations between the two currencies in the month of March 2003). The goods remained in the inventory of Small at 31 March 2003 but on 29 March 2003, Small sent Big a cheque for 30 million florins to clear its payable. Big received and recorded this cash on 3 April 2003.
Note 3 - Exchange rates
DateExchange rate
(florins to$1)
1 April 1994 ..........................................................7
1 April 1997 ..........................................................6
31 March 2002 .......................................................5.5
31 March 2003 .......................................................5
Weighted average for the year to 31 ..............................5.2
March 2003
Weighted average for the dates of ...............................5.1
acquisition of closing inventory
Required:
Translate the statement of financial position of Small at 31 March 2003 into $s and prepare the consolidated statement of financial position of the Big group at 31 March 2003.

Transcribed Image Text:

Big $000 Small FLO00FLO0 Non-current assets: Proporty, plant and ecquipment Investmentis 60 000 500 80 000 500 80 000 Current assets: Inventories Trade receivables Cash 30 000 25 000 3 000 40 000 2 000 4 000 58 000 127 500 76 000 156 000 Issued capital and reserves: Called up share capital (150 cent e tlorin shares) Revaluation reserve 40 000 30 000 15 000 34 000 79 500 Accumulated profts 44 000 84 000 Non-current liabilities: interest-bearing borrowings Deferred tx 5 000 5 000 30 000 9 000 Current liabilities: 20 000 39 000 Trade payabies Tax 12 000 16 000 15 000 18 000 28 000 127 500 33 000 156:000