Posh plc, a public limited company is expanding the group business. On 1 April 2019, Posh plc acquired 80% interest in Space Ltd and 30% interest in Aero Ltd. Posh plc is represented on Aero Ltd’s board of directors. Below are the statement of comprehensive income of Posh plc, Space Ltd and Aero Ltd for the year ended 31 March 2020.

	Posh plc ($’000)	Space Ltd ($’000)	Aero Ltd ($’000)
Revenue	50,000	20,000	10,000
Cost of sales	(35,000)	(13,000)	(6,800)
Gross Profit	15,000	7,000	3,200
Operating expenses	(7,600)	(2,500)	(1,700)
Operating profit	7,400	4,500	1,500
Management services to Space Sdn Bhd	200	-	-
Dividend from Space Bhd	600	-	-
Finance Income	100	-	-
Finance costs	-	(120)	(10)
Profit before tax	8,300	4,380	1,490
Taxation	(2,500)	(1,300)	(450)
Profit after tax	5,800	3,080	1,040

Additional information:

1. Posh plc trades with Space Ltd and during the year Posh plc sold goods for $3,000,000 to Space Ltd.
2. Posh plc sells to Space Ltd at cost plus 25%. Half of these goods remain unsold in Space Ltd.
3. Posh plc has recognized a dividend declared and paid by Space Ltd of $600,000 during the year.
4. Included in the operating expenses of Space Ltd is an amount of $200,000 management fees charged by Posh plc for the services provided.
5. Posh plc charges Space Ltd interest of $100,000 for the advances given to Space Ltd.
6. Investment in Aero Ltd is impaired by $50,000

REQUIRED:

1. (a) Prepare the consolidated statement of comprehensive income for the year ended 31 March 2020.                                                                                            

(b) After the above statement presented to the directors, the operation director is questioning as to how to derive at the Group Revenue and why the Revenue of Aero Ltd has not been included as part of the Group Revenue. It is Posh plc’s target to increase their revenue and profit by more than 50% after the business expansion. As a group accountant, give your explanation with justification to the director by referring to the relevant accounting standards.

Answer rating: 100% (QA)

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