On 1 January 20X6, Parent acquired 75% of Sibling equity shares by means of a share...

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On 1 January 20X6, Parent acquired 75% of Sibling equity shares by means of a share exchange of two shares in Parent for every three Sibling shares acquired. On that date, further consideration was also issued to the shareholders of Sibling in the form of a $100 8% loan note for every 100 shares acquired in Sibling. None of the purchase consideration, nor the outstanding interest on the loan notes at 31 March 20X6, has yet been recorded by Parent. At the date of acquisition, the share price of Parent and Sibling is $3-20 and $1-80 respectively. The summarised statements of financial position of the two companies as at 31 March 20X6 are: Parent Company Sibling Company $'000 $'000 Assets Non-current assets Property, plant and equipment (note (i)) Investment in Aunt Co at 1 April 20X5 (note (iv)) Current assets Inventory (note (iii)) Trade receivables (note (iii)) Bank Total assets Equity and liabilities Equity Equity shares of $1 each Retained earnings - at 1 April 20X5 for year ended 31 March 20X6 Non-current liabilities 8% loan notes Current liabilities (note (iii)) Total equity and liabilities 75,200 4,500 79,700 19,400 14,700 1,200 35,300 115,000 50,000 20,000 16,000 86,000 5,000 24,000 29,000 115,000 31,500 31,500 18,800 12,500 600 moths pre-auque 3 31,900 63,400 prot aug 20,000/15/ 19,000 8,000 47,000 nillo 16,400 16,400 63,400 The following information is relevant: i. At the date of acquisition, the fair values of Sibling's assets were equal to their carrying amounts. However, Sibling operates a mine which requires to be decommissioned in five years' time. No provision has been made for these decommissioning costs by Sibling. The present value (discounted at 8%) of the decommissioning is estimated at $4m and will be paid five years from the date of acquisition (the end of the mine's life). prouision ii. iii. iv. V. vi. vii. Parent's policy is to value the non-controlling interest at fair value at the date of acquisition. Sibling's share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. 1.0 The inventory of Sibling includes goods bought from Parent for S2-1m. Parent applies a consistent mark-up on cost of 40% when arriving at its selling prices. On 28 March 20X6, Parent despatched goods to Sibling with a selling price of $700,000: These were not received by Sibling until after the year end and so have not been included in the above inventory at 31 March 20X6. Gods in trans > current At 31 March 20X6, Parent's records showed a receivable due from Sibling of $3 million, this differed to the equivalent payable in Sibling's records due to the goods in transit. The intra-group reconciliation should be achieved by assuming that Sibling had received the goods in transit before the year end. renuliahon The investment in Aunt represents 30% of its voting share capital and Parent uses equity accounting to account for this investment. Aunt's profit for the year ended 31 March 20X6 was $6m and Aunt paid total dividends during the year ended 31 March 20X6 of $2m. Parent has recorded its share of the dividend received from Aunt in investment income (and cash). All profits and losses accrued evenly throughout the year. There were no impairment losses within the group for the year ended 31 March 20X6. Required: Prepare the consolidated statement of financial position for Parent Co as at 31 March 20X6. On 1 January 20X6, Parent acquired 75% of Sibling equity shares by means of a share exchange of two shares in Parent for every three Sibling shares acquired. On that date, further consideration was also issued to the shareholders of Sibling in the form of a $100 8% loan note for every 100 shares acquired in Sibling. None of the purchase consideration, nor the outstanding interest on the loan notes at 31 March 20X6, has yet been recorded by Parent. At the date of acquisition, the share price of Parent and Sibling is $3-20 and $1-80 respectively. The summarised statements of financial position of the two companies as at 31 March 20X6 are: Parent Company Sibling Company $'000 $'000 Assets Non-current assets Property, plant and equipment (note (i)) Investment in Aunt Co at 1 April 20X5 (note (iv)) Current assets Inventory (note (iii)) Trade receivables (note (iii)) Bank Total assets Equity and liabilities Equity Equity shares of $1 each Retained earnings - at 1 April 20X5 for year ended 31 March 20X6 Non-current liabilities 8% loan notes Current liabilities (note (iii)) Total equity and liabilities 75,200 4,500 79,700 19,400 14,700 1,200 35,300 115,000 50,000 20,000 16,000 86,000 5,000 24,000 29,000 115,000 31,500 31,500 18,800 12,500 600 moths pre-auque 3 31,900 63,400 prot aug 20,000/15/ 19,000 8,000 47,000 nillo 16,400 16,400 63,400 The following information is relevant: i. At the date of acquisition, the fair values of Sibling's assets were equal to their carrying amounts. However, Sibling operates a mine which requires to be decommissioned in five years' time. No provision has been made for these decommissioning costs by Sibling. The present value (discounted at 8%) of the decommissioning is estimated at $4m and will be paid five years from the date of acquisition (the end of the mine's life). prouision ii. iii. iv. V. vi. vii. Parent's policy is to value the non-controlling interest at fair value at the date of acquisition. Sibling's share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest. 1.0 The inventory of Sibling includes goods bought from Parent for S2-1m. Parent applies a consistent mark-up on cost of 40% when arriving at its selling prices. On 28 March 20X6, Parent despatched goods to Sibling with a selling price of $700,000: These were not received by Sibling until after the year end and so have not been included in the above inventory at 31 March 20X6. Gods in trans > current At 31 March 20X6, Parent's records showed a receivable due from Sibling of $3 million, this differed to the equivalent payable in Sibling's records due to the goods in transit. The intra-group reconciliation should be achieved by assuming that Sibling had received the goods in transit before the year end. renuliahon The investment in Aunt represents 30% of its voting share capital and Parent uses equity accounting to account for this investment. Aunt's profit for the year ended 31 March 20X6 was $6m and Aunt paid total dividends during the year ended 31 March 20X6 of $2m. Parent has recorded its share of the dividend received from Aunt in investment income (and cash). All profits and losses accrued evenly throughout the year. There were no impairment losses within the group for the year ended 31 March 20X6. Required: Prepare the consolidated statement of financial position for Parent Co as at 31 March 20X6.

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ANSWER Financial position is the current balance of the recorded assets liabilities and equity of an ... View the full answer