QUESTION 1 (25 MARKS) Mandy is a company which operates in the service sector. Mandy has business relationships with Billy and Henley. All three entities are public limited companies. The draft statements of financial position of these entities are as follows at 30 November 20X12:

The following information is relevant to the preparation of the group financial statements: 1. On 1 December 20X10, Mandy acquired 70% of the equity interests of Billy. The purchase consideration comprised cash of $730 million. The retained earnings of Billy were $319 million on 1 December 20X10.

2. On 1 December 20X10, the fair value of the identifiable net assets of Billy was equal to their book values except freehold land which had an excess of $89 million over its book value.

3. On 1 December 20X11, Billy acquired 80% of the equity interests of Henley for a cash consideration of $320 million. The retained earnings of Henley were $106 million on 1 December 20X11.

4. It is the group's policy to measure the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests in Billy on 1 December 20X10 was $295 million. The fair value of the 44% non-controlling interest in Henley on 1 December 20X11 was $161 million.

5. Both Billy and Henley were tested for impairment at 30 November 20X12. Goodwill of Billy and Henley were impaired by $30 million and $10 million, respectively.

6. During 20X12, Henley had made intragroup sales to Billy of $50 million, making a profit of 25% on cost and $25 million of these goods were in inventories at 30 November 20X12.

7. During 20X12, Billy had made intragroup sales to Mandy of $30 million, making a profit of 20% on cost and all of these goods were in inventories at 30 November 20X12.

Required:

a) Prepare the consolidated statement of financial position for the Mandy Group as at 30 November 20X12. (Show all your workings clearly) (23.5 marks)

b) Briefly explain the term CONTROL as per NZ IFRS 3 - Business Combinations, in relation to the definition of a Subsidiary company.