ASSOCIATE GROUP OF CONSULTANTS

QUESTION 1 NBAA NOV 2023

The following Statements of Profit or Loss and Other Comprehensive Income relate to three
entities; Konkoni, Zoazoa and Yaoyao for the year ended 31st October 2021.

Statement of Comprehensive Income

Konkoni ZoaZoa Yaoyao
TZS. TZS. TZS.
million million million
Revenue 3,560 1,550 1,200
Cost of sales (2,050) (900) (570)
Gross profit 1,510 650 630
Operating expenses (845) (580) (480)
Finance cost (15) - -
Profit before taxation 650 70 150
Taxation (350) (110) (90)
Profit for the year 300 (40) 60
Other Comprehensive Income
Revaluations of Property, Plant and Equipment 80 - -
Total Comprehensive Income for the year 380 (40) 60
Additional information:
(i) Konkoni purchased 210 million ordinary shares (representing 70% of the total number of
ordinary shares) in Zoazoa on 1st February 2021, when the other reserves of Zoazoa was
TZS.49 million and the retained earnings of Zoazoa was TZS.310 million. The
consideration was agreed at TZS.1,430 million. This was satisfied by issurance of 120
million of Konkoni’s ordinary shares at agreed fair value of TZS.1,130 million, plus
TZS.300 million to be paid by Konkoni on 31st October 2021 if a profit target (TZS.80
million) is achieved by Zoazoa by the year ended 31st October 2021. The contingent

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 element of the consideration was recorded at its fair value of TZS.240 million at 1st
February 2021. As it turned out, significant losses were incurred by Zoazoa for the
period of 31st October 2021. Consequently, nothing is payable by Konkoni on

31st October 2021 under this part of the deal. No entry has been made by Konkoni to
reflect this change in expectation.

At year end, book value per share was TZS.4 for Konkoni and TZS.3 for Zoazoa while
market price per share was TZS.7 for Konkoni and TZS.5 for Zoazoa. Zoazoa has not
issued any shares since acquisition.

(ii) At the date of acquisition of Zoazoa, carrying values of its net assets were equal to fair
values except a contingent liability of TZS.10 million as disclosed in the financial
statements of Zoazoa which had an estimated fair value of TZS.9 million. Subsequent to
acquisition, the liability has been recognized by Zoazoa in its books as TZS.7 million.
Ignore deferred tax implication of this adjustment.
(iii) The policy of Konkoni Group is to value non-controlling interests (NCI) at their fair value
at the acquisition date. On that date, the fair value of the NCI of Zoazoa was TZS.360
million. Due to the unexpected losses incurred by Zoazoa during the year, an impairment
test was undertaken on 31st October 2021, and goodwill was found to be impaired by 40%
of its acquisition value. Konkoni charges goodwill impairment to operating expenses.
(iv) On 1st August 2021, Konkoni purchased 30% equity holding in Yaoyao. The consideration
was agreed at TZS.120 million to be settled in cash in Konkoni on 30th June 2022. Konkoni
has not yet recorded this. Following an unexpected postacquisition poor performance, the
investment was impaired by TZS.1.5 million.
(v) The following inter-company sales at cost plus five-eighths (5/8) were made during the
year ended 31st October 2021.

Sales Included in buyer’s

closing stock-in-trade
TZS. million TZS. Million

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 Konkoni to Yaoyao 86 13
(all bought in September and
October by Yaoyao)
Zoazoa to Konkoni 115 26

(vi) All profits or loss and other comprehensive income items occurred evenly unless otherwise
indicated. Any effects of contingencies relating to the current period should be adjusted
against operating expenses.
(vii) The applicable discount rate is 20%. Ignore deferred tax unless otherwise stated.
REQUIRED:
Prepare Konkoni Group’s Consolidated Statement of Profit or Loss and Other Comprehensive

Income for the year ended 31st October 2021.

QUESTION 2 NBAA NOV 2022

(a) Briefly discuss the circumstances in which a company may gain control over another
company but will not be allowed to prepare consolidated financial statements.
(b) TINA LTD acquired a controlling interest in VERO LTD after purchasing 70% of the
issued ordinary share capital of VERO LTD four years a ago on 1st January, 2018. The
following are the Statements of Financial Position for TINA LTD and VERO LTD as at
31st December, 2021:
Statement of financial position as at 31st December, 2021
TINA LTD VERO LTD
TZS. TZS. TZS. TZS.
Property, Plant and 656,250,000 150,000,000
Equipment
Investments
VERO LTD 250,000,000
FAU LTD 50,000,000
Total non-current assets 956,250,000 150,000,000

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 Current Assets
Inventory 275,000,000 87,500,000
Receivables 181,250,000 131,250,000
Bank 125,000,000
581,250,000 218,750,000
Total Assets 1,537,500,000 368,750,000
Equity and Liabilities
Equity
Equity share capital (1 TZS. 925,000,00 212,500,000
Per share)
Retained Earning 268,750,000 62,500,000
Total Equity 1,193,750,000 275,000,000
Current Liabilities
Payables 343,750,000 93,750,000
Total Equity and 1,537,500,000 368,750,000
Liabilities

The following additional information are also available:

(i) On the acquisition date the retained earnings of VERO LTD were TZS.25,000,000.
(ii) It is the policy of TINA LTD group to value the non-controlling interest at fair value.
The market price of the shares of the non- controlling shareholders just before the
acquisition was TZS.1.5
(iii) One of the TINA LTD plants with carrying amount of TZS.62,500,000 was revalued
to its fair value of TZS.75,000,000 on the acquisition date. The plant had 5 years of
useful life at that date and the revaluation was not recorded in the TINA LTD
financial statements.
(iv) The impairment analysis conducted revealed that goodwill and investment in
associate were not impaired.
(v) Profit and losses accrued evenly throughout the year.
(vi) TINA LTD acquired 40% of the issued ordinary share capital of FAU LTD on
1stJuly, 2021 for TZS.50,000,000.

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 (vii) During the acquisition of FAU LTD its retained earnings were TZS.15,000,000.
TINA LTD exercises significant influence in all financial and operating policies of
FAU LTD. FAU LTD profit for the year ended 31st December, 2021 was
TZS.10,000,000.
(viii) Intercompany transactions show that VERO LTD has sold goods to TINA LTD at
a markup of 25%. As at 31st December 2021, the inventories of TINA LTD include
TZS.56,250,000 of goods purchased from VERO LTD.
(ix) TINA LTD owes VERO LTD TZS.43,750,000 in respect to the goods purchased
from VERO LTD and VERO LTD accounts reported the same amount as
receivable.
(x) VERO LTD owes TINA LTD TZS.18,750,000 for services rendered by TINA LTD.
This amount has been reported by TINA LTD as receivable.
REQUIRED:
Prepare the Consolidated Statement of Financial Position of TINA LTD Group as at

31st Decembers, 2021.

QUESTION 3 NBAA MAY 2022

The following are separate annual reports for Farm and Plot. All amounts are in Thousands of
Tanzanian Shillings.

STATEMENT OF FINANCIAL POSITION AS AT 30TH SEPTEMBER, 2021

ASSETS FARM PLOT
Land and buildings 937,000 523,000
Other Tangible Assets 244,350 214,525
Bonds 130,000 -
Investment in Plot 450,000 -
Trade receivables 192,000 115,000
Interest and dividend receivable 58,000 5,000
Inventory 208,400 68,300

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 Cash 33,235 102,250
Total Assets 2,252,985 1,028,075

EQUITY AND LIABILITIES

TZS.400 Ordinary shares 1,360,000 520,000
Retained Earnings 341,000 101,000
General Reserve 8,635 3,550
TZS.5,500 15% preference shares 40,000 66,000
10% Loan 100,000 60,000
5% Bond - 84,000
Tax payable 34,350 13,125
Trade payables 239,000 107,000
Interest and Dividend payable 130,000 73,400
TOTAL EQUITY AND LIABILITIES 2,252,985 1,028,075

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE

INCOME FOR YEAR ENDED 30TH SEPTEMBER 2021
FARM PLOT
Sales 1,856,300 1,003,200
Cost of sales 835,335 418,760
Gross Profit 1,020,965 584,440
Operating Expenses 467,260 398,778
Interest 10,000 8,500
Profit before tax 543,705 177,162
Tax 113,518 82,338
Profit for the year 430,187 94,824
Other Comprehensive Income 6,475.1 3,345.2
Total Comprehensive Income 436,662.1 98,169.2

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Notes for Consolidation Adjustments
(i) Farm acquired 70% and 40% of ordinary and of preference shares respectively in Plot when
undistributed profits reserve was TZS.30 million. There were no any balance in any other
reserve on the date of acquisition. Farm paid cash in respect of the deal. Fair value of land
and buildings in Plot was TZS.20 million above their book value while that of non-
controlling interest stood at TZS.215 million.
(ii) A fifth of goodwill was impaired on September 30th 2021.
(iii) All intercompany sales during the year had a margin of 20%. Table below has additional
details of intercompany sales/purchases:
Details Farm Plot
Purchases from within the group (TZS. Million) 25 60
Stock purchase within group on hand by 30th September 2021 – (%) 20 40

All goods transacted between group members were for resale. Farm had settled all amounts
due to Plot by year end while Plot had not paid any amount in respect of its purchases from
Farm.
(iv) Farm depreciates its tangible non-current assets at 10% on book value while Plot applies a
20% charge on carrying value for similar assets.
(v) By 30th September 2021, Plot had paid all ordinary and preference dividends outstanding
on 1st October 2020.
(vi) Plot issued a 5% bond to Farm. Plot pays interest on long-term debts annually on 30th
November and that the previous one was paid successfully.
REQUIRED:
(a) Prepare Consolidated Statement of Profit or Loss and Other Comprehensive Income for
Farm Group for year ended 30th September 2021.
(b) Prepare Consolidated Statement of Financial Position for Farm Group as at 30th
September 2021.

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QUESTION 4 NBAA NOV 2021

(a) The following are components of financial statements of Nyumba and Banda for the year
2019. All amounts are in Tanzanian Shillings (TZS).
STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER, 2019
Nyumba Banda
ASSETS
Non-current Assets
Tangible Non-current assets 724,000,000 280,967,500
Investment in Banda 320,000,000
Total Non-current Assets 1,044,000,000 280,967,500
Current Assets
Cash and Bank 116,702,000 114,565,500
Debtors 96,300,000 45,800,000
Stock 23,180,000 84,200,000
Dividend 15,680,000 2,500,000
Total Current Assets 251,862,000 247,065,500
TOTAL ASSETS 1,295,862,000 528,033,000

EQUITY AND LIABILITIES

Equity
Share capital TZS (each TZS.400) 840,000,000 280,000,000
Retained earnings 296,000,000 162,033,000
Total Equity 1,136,000,000 442,033,000
Liabilities
Creditors 23,250,000 28,400,000
Dividend 105,000,000 22,400,000
Tax 31,612,000 35,200,000
Total Liabilities 159,862,000 86,000,000
TOTAL EQUITY AND LIABILITIES 1,295,862,000 528,033,000

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 STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 31ST
DECEMBER,
2019
Nyumba Banda
Sales 1,352,000,000 523,000,000
Cost of Sales (702,400,000) (192,800,000)
Gross Profit 649,600,000 330,200,000
Operating Expenses (285,400,000) (98,620,000)
Operating Profit 364,200,000 231,580,000
Dividend Income 15,680,000 2,500,000
Profit before tax 379,880,000 234,080,000
Corporate tax (90,915,000) (69,474,000)
Profit for the year 288,965,000 164,606,000

Additional Notes
i) Nyumba exchanged its 1 share for 6 shares of Banda at their nominal values and
topped up that consideration with TZS.200 million to acquire 70% shareholding in the
latter in June 2017. Retained earnings of Banda on that date of acquisition was
TZS.96.4 million and fair value of its tangible non-current assets was TZS.60 million
above their book value.
ii) Banda sold merchandise to Nyumba for TZS.8 million for which their selling price
include a profit of TZS.2 million. These goods were for resale but only half of those
goods had been sold by 31st December 2019.
iii) Nyumba and Banda declared a dividend of TZS.50 and TZS.32 per share respectively.
Current year dividend was still payable by year end. Neither Nyumba nor Banda had
any dividend payable of the previous year at the beginning of the current year.
iv) Both Nyumba and Banda depreciate tangible non-current assets on reducing balance
method at 20% and 15% respectively.

REQUIRED:

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 (a) Prepare a Consolidated Statement of Profit or Loss for the year ended 31st December 2019.

(b) Prepare a Consolidated Statement of Financial Position as at 31st December 2019.

QUESTION 5 NBAA MAY 2021

Pantaleo Pharmaceuticals Co. is a well-established company operating in the country of Sadena.

It manufactures different types of drugs and vaccines intended for low income countries. In
attempt to improve its operation, Pantaleo acquired 35% shareholding of its major supplier
Athanas on 1st June 2019. Pantaleo also went ahead and acquired 85% majority shareholding of
Salehe Chemicals Co. a growing start-up on 1st April 2020. The Statements of Profit or Loss and
Other Comprehensive Income for the year ended 31st December 2020 are as follows:

Pantaleo Salehe Athanas

TZS. Millions TZS. Millions TZS. Millions

Revenue 1,057,500 327,000 384,000

Cost of sales (480,000) (121,500) (125,250)
Gross profit 577,500 205,500 258,750
Distribution costs (87,000) (24,000) (27,750)
Administrative expenses (138,000) (42,000) (43,500)
Investment income 69,000 3,000 0
Finance costs (18,000) (21,000) (16,500)
Profit before tax 403,500 121,500 171,000
Income tax expense (77,250) (22,500) (32,145)
Profit for the year 326,250 99,000 138,855
Other comprehensive income
Gain on revaluation of land 4,200 4,500 -
Total comprehensive income for the 330,450 103,500 138,855
year
The following information is relevant

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 (i) Pantaleo’s valuers carried out the valuation exercise on 1st April 2020 and came to realize
that carrying amounts of Salehe Co’s net assets were equal to their fair values with the
exception of an item of plant which had fair value of TZS.12 billion in excess of its carrying
amount. At 1st April 2020, the plant in question had a remaining life of three (3) years.
Depreciation is charged to cost of sales.
(ii) Pantaleo Co had sold goods to Salehe post acquisition and invoiced Salehe for an amount
totalling TZS.58.5 billion. Salehe Co. had one quarter of these goods in inventory at 31 st
December 2020. During the year Pantaleo Co. had also sold goods to Athanas Co. for
TZS.39 billion all of which Athanas Co. held in inventory at 31st December 2020. All of
these goods had a mark-up on cost of 30%.
(iii) The investment income of Pantaleo Co. for the year ended 31st December 2020 includes
dividends received from Salehe Co. and Athanas Co. (refer to note [(iv)]. It also includes
TZS.7.5 billion interest receivables on a loan made to Salehe Co. on 1st April, 2020.
(iv) Salehe Co. paid a dividend to shareholders of TZS.27 billion on 31st December 2020.
Athanas Co. paid a dividend on 31st December 2020 of TZS.52.5 billion.
(v) In Pantaleo Co’ Consolidated Statement of Financial Position as at 31st December 2019,
the carrying amount of Pantaleo Co’s investment in Athanas Co. was TZS.217,500,000.
This was calculated using equity accounting.
(vi) All other comprehensive income occurred after 1st April 2020. Unless otherwise indicated
all other items in the above Statements of Profit or Loss and Other Comprehensive Income
are deemed to accrue evenly over the year.
REQUIRED:
(a) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income of
Pantaleo Pharmaceuticals Co. for the year ended 31st December 2020.
(b) Calculate the carrying amount of the investment in Athanas Co. in the Consolidated
Statement of Financial Position for Pantaleo Co. as at 31st December 2020.

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QUESTION 6 NBAA NOV 2019
On 1st January 2018, Opio acquired 75% of Opoo’s equity shares by means of an immediate
share exchange of two shares in Opio for five shares in Opoo. The fair value of Opio and

Opoo’s shares on 1st January 2018 were TZS.4.00 and TZS.3.00 respectively. In addition to
the share exchange, Opio will make a cash payment of TZS.1.32 per acquired share, deferred

until 1st January 2019. Opio has not recorded any of the consideration for Opoo in its
financial statements. Opio’s cost of capital is 10% per annum

The summarized statements of financial position of the two companies as at 30th June 2018
are:

Opio Opoo
TZS. ‘000’ TZS. ‘000’
Assets
Non-current assets (note (ii))
Property, plant and equipment 55,000 28,600
Financial asset equity investments 11,500 6,000
(note (v))
66,500 34,600
Current assets
Inventory (note (iv)) 17,000 15,400
Trade receivables (note iv)) 14,300 10,500
Bank 2,200 1,600
33,500 27,500
Total assets 100,000 62,100
Equity and liabilities
Equity
Equity shares of TZS.1 each 20,000 20,000

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 Other component of equity 4,000 nil

Retained earnings – at 1st July 2017 26,200 14,000

- For year ended 30th 24,000 10,000

June 2018
74,200 44,000
Current liabilities (note (iv)) 25,800 18,100
Total equity and liabilities 100,000 62,100

The following information is relevant:

(i) Opoo’s business is seasonal and 60% of its annual profit is made in the period
between 1st January to 30th June each year.
(ii) At the date of acquisition, the fair value of Opoo’s net assets was equal to their
carrying amounts with the following exceptions.
(a) An item of plant had a fair value of TZS.2 million below its carrying value.
At the date of acquisition, it had a remaining life of two years.
(b) The fair value of Opoo’s investments was TZS.7 million (see also note (v)).

(c) Opoo owned the rights to a popular mobile (cell) phone game. At the date of
acquisition, a specialist valuer estimated that the right was worth TZS.12
million and had an estimated remaining life of five years.
(iii) Following an impairment review, consolidated goodwill is to be written down
by TZS.3 million as at 30th June 2019.
(iv) Opio sells goods to Opoo at cost plus 30%. Opoo had TZS.1.8 million of goods
in its inventory at 30th June 2018 which had been supplied by Opio. In addition,
on 28th June 2018, Opio processed the sale of TZS.800,000 of goods to Opoo,
which Opoo did not account for until their receipt on 2 nd July 2018. The in-
transits reconciliation should be achieved by assuming the transaction had been
recorded in the books of Opoo before the year end. At 30th June 2018, Opio had
a trade receivable balance of TZS.2.4 million due from Opoo which differed to
the equivalent balance in Opoo’s books due to the sale made on 28th June 2018
(v) At 30th June 2018, the fair value of the financial asset’s equity investment of

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 Opio and Opoo were TZS.13.2 million and TZS.7.9 million respectively.
(vi) Opio’s policy is to value the non-controlling interest at fair value at the date of
acquisition. For this purpose, Opoo’s share prices at that date is representative
of the fair value of the share held by the non-controlling interest.

REQUIRED:

Prepare the Consolidated Statement of Financial Position for Opio as at 30th June 2018.

QUESTION 7 NBAA MAY 2019

ALEXIS Plc holds shares in YAVA Plc. On 1st April 2014, ALEXIS purchased 600,000 shares in
YAVA at a cost of TZS.1,600 per share. The fair value of YAVA’s tangible assets on 1 st April
2014 was TZS.126,000,000 more than book value. The retained profits of YAVA on 1st April 2014
were TZS.120,000,000. The excess of fair value over book value was attributed to buildings held
by YAVA. On 1st April 2014, the buildings had an estimated remaining useful life of 21 years.
The draft summarized financial statements for the two entities as of 31st March 2018 are given
below:

Summarized Statement of Financial Position as at 31st March 2018:

ALEXIS YAVA

TZS.‘000’ TZS.‘000’
Non-current assets
Property, plant and equipment 1,210,000 700,000
Investment in YAVA at cost 960,000 0
2,170,000 700,000
Current assets
Sundry debtors 1,780,000 620,000
Current a/c with YAVA Ltd 80,000 0
1,860,000 620,000

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 Total assets 4,030,000 1,320,000

Equity and reserves

Equity shares of TZS.1,000 each 2,000,000 600,000
Retained earnings 400,000 300,000
2,400,000 900,000
Current liabilities
Trade payable 1,630,000 360,000
Current account with ALEXIS plc 0 60,000
1,630,000 420,000
Total Equity and Liabilities 4,030,000 1,320,000

Summarized Statement of Profit or Loss and other Comprehensive Income for the
year ended 31st March 2018:
ALEXIS YAVA
TZS.‘000’ TZS.‘000’
Revenue 910,000 390,000
Cost of sales (461,000) (171,000)
Gross Profit 449,000 219,000
Other income – dividends received 50,000 0
Expenses (110,000) ( 43,000)
389,000 176,000
Finance cost (30,000) (22,000)
359,000 154,000
Taxation (43,000) (12,000)
Profit for the year 316,000 142,000
Additional information:

I. YAVA paid an interim dividend of TZS.50,000,000 on 31st December 2017.

II. YAVA sent a cheque for TZS.20,000,000 to ALEXIS on 30th March 2018.

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III. ALEXIS occasionally trades with YAVA. In November 2017 sold goods to YAVA for
TZS.90,000,000. ALEXIS uses a mark up of 50% on cost. On 31st March 2018,
IV. YAVA had not paid for the goods and they were all still in YAVA’s closing inventory.
REQUIRED:

(a) Prepare a consolidated Statement of Profit or loss and other Comprehensive Income
for the year ended 31st March 2018 and a consolidated Statement of Financial
(b) Position for the ALEXIS group of entities as at 31st March 2018.

QUESTION 8 NOV 2018

On 1st January 2017 Babake Co. Ltd acquired 60,000 of the 100,000 equity shares in Mwanae
Co. Ltd, it’s only subsidiary. The draft statements of profit or loss and other comprehensive
income of both companies as at 31st December 2017 are shown below

Babake Mwanae

Co. Ltd Co. Ltd

TZS.‘000’ TZS.‘000’

Revenue 43,000 26,000

Cost of sales (28,000) (18,000)

Gross profit 15,000 8,000

Other income – dividend received from Mwanae 2,000 -

Distribution costs (2,000) (800)

Administrative expenses (4,000) (2,200)

Finance costs (500) (300)

Profit before tax 10,500 4,700

Income tax expense (1,400) (900)

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 Profit for the year 9,100 3,800

Other comprehensive income:

Gain on property revaluation (Note 1) - 2,000

Investment in equity instrument 200 -

Total comprehensive income for the year 9,300 5,800

The following additional information is relevant:

I. At the date of acquisition, the fair values of Mwanae’s assets were equal to their carrying
amounts with the exception of a building which had a fair value TZS.1 million in excess
of its carrying amount. At the date of acquisition, the building had a remaining useful life
of 20 years. Building depreciation is charged to administrative expenses. The building was
revalued again at 31st December 2017 and its fair value had increased by an additional
TZS.1,000,000.
II. Sales from Babake to Mwanae were TZS.6 million during the post-acquisition period. All
of these goods are still held in inventory by Mwanae. Babake marks up all sales by 20%.
III. Despite the property revaluation, Babake has concluded that goodwill in Mwanae has been
impaired by TZS.500,000.
IV. It is Babake’s policy to value the non-controlling interest at full (fair) value.
V. Income and expenses can be assumed to have arisen evenly throughout the year.
REQUIRED:

(a) Prepare the consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31st December 2017.
(b) One shareholder of Babake Co. Ltd in part (a) above was concerned that following the
acquisition, the profit from operations of the parent and subsidiary were less than the
aggregate of the individual profit from operation figures. She was concerned that the

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 acquisition, which the directors had supported as means of improving earnings per
share, appeared to have reduced the combined profits. She wanted to know where the
profits had gone.

REQUIRED:

Give explanation to the concerned shareholder.

QUESTION 9 NBAA MAY 2017

(a) International Financial Reporting Standard [IFRS 10] requires an entity that is a parent to
prepare consolidated financial statements.

(i) Define control in the context of IFRS 10.

(ii) State the justification of full consolidation where the parent owns less than 100%
of the ordinary shares of a subsidiary.
(b) On 1st July 2013, Halahala Company acquired 128,000 of Sosomola company’s 160,000
shares. The following Statements of Financial Position have been prepared as at 31 st
December 2016.

Halahala Sosomola

TZS ‘000’ TZS ‘000’

Property, plant and equipment 152,000 129,600

Investment in Sosomola 203,000 -

Inventory at cost 112,000 74,400

Receivables 104,000 84,000

Bank balance 41,000 8,000

612,000 296,000

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 Ordinary share capital (TZS 1,000 each) 100,000 160,000

Retained earnings 460,000 112,000

Payables 52,000 24,000

612,000 296,000

The following information is available:

(i) At 1st July 2013 Sosomola had a debit balance of TZS.11,000,000 on retained earnings.
(ii) Property, plant and equipment of Sosomola included land at a cost of TZS.72,000,000.
This land had a fair value of TZS.100,000,000 at the date of acquisition.
(iii) An impairment review at 31st December 2016 shows that goodwill is impaired by 40%.
(iv) The inventory of Sosomola includes goods purchased from Halahala for TZS.16,000,000.
Halahala invoiced those goods at cost plus 25%.
(v) The receivables at 31st December 2016 in Halahala include a receivable of TZS.7,800,000
from Sosomola, and the payables in Sosomola include an amount of TZS.6,000,000
payable to Halahala. The difference reflects a remittance made at 30th December 2016, not
yet received and recorded in Halahala’s books.
REQUIRED:

Prepare the Consolidated Statement of Financial Position of Halahala as at 31st December 2016.

QUESTION 10 CPA IRELAND AUG 2020

The following financial statements relate to Everett Plc (Everett) and its investee company,
Redmond Plc (Redmond).

Statements of Profit or Loss for year ended 31 March

2020

Everett Plc Redmond Plc

TZS million TZS million
Revenue 900 276

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 Cost of Sales (420) (132)

Gross profit 480 144

Administration expenses (169) (54)

Distribution costs (35) (24)
Other income 21

Profit before taxation 297 66

Taxation (36) (6)

Profit for the year 261 60

Statements of Changes in Equity (Retained Earnings only) for year ended 31 March 2020

Everett Plc Redmond Plc

TZS million TZS million
Balance 1 April 2019 289 57
Profit for the year 261 60
Dividends proposed (32) (24)

Balance 31 March 2020 518 93

Statements of Financial Position as at 31 March 2020

Everett Plc Redmond Plc
TZS million TZS million
Non-current assets:
Property, plant & equipment 580 260
Investments 400 30
980 290
Current assets:
Inventories 76 34

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 Trade receivables 58 53
Cash & bank 20 12
154 99
Total assets 1,134 389

Equity:
Equity share capital of €1 each 500 200
Share premium 25 30
Retained earnings 518 93
1 ,043 323
Current liabilities:
Trade payables 41 32
Taxation 18 10
Dividends proposed 32 24
91 66
Total equity & liabilities 1,134 389

The following additional information is provided:

(i) Everett bought a 75% interest in the equity capital of Redmond on 1 August 2019. The cost
of the investment was €300 million, paid in cash. It was decided to apply the fair value
method to calculate goodwill on acquisition. On the acquisition date, the fair value of the
non-controlling interest in Redmond was €95 million. Impairment losses of €10.3 million
have occurred since acquisition.
(ii) At the date of acquisition Redmond had some specialised equipment that was deemed to
have a fair value of €16 million in excess of its carrying value. This equipment had a 4-year
useful economic life from its acquisition date.
(iii) On an even basis over the entire year, Redmond sold goods to Everett for €12 million.
Redmond earns 25% margin on goods sold to Everett. €4 million of the goods purchased

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 from Redmond remained in the inventory of Everett at 31 March 2020. This inventory
consisted of goods that were all purchased in the post-acquisition period.
(iv) The remaining investments in the books of Everett consist of equity investments. These had
a fair value of €96 million at 31 March 2020. No election was made under IFRS 9 to take
gains or losses on any equity investments to Other Comprehensive Income.
(v) On 31 March 2020, both companies declared and correctly recorded proposed dividends. In
the case of Redmond these were declared out of post-acquisition profits. Everett has not
taken account of any dividends receivable.
(vi) All calculations may be taken to the nearest €0.1 million. Assume all expenses and gains
accrue evenly throughout the year unless otherwise instructed. No new equity capital was
issued by any group company during the year.
REQUIREMENT:

(a) Prepare, in accordance with IFRS, the Consolidated Statement of Profit or Loss and
Other Comprehensive Income for the Everett group for year ended 31 March 2020.
(b) Prepare, in accordance with IFRS, the Consolidated Statement of Financial Position for the
Everett group as at 31 March 2020.

QUESTION 11 CPA IRELAND AUG 2019

Lowry Plc (Lowry) is a public limited company based in Ireland with shareholdings in two other
companies, Moran Plc (Moran) and Lucas Plc (Lucas). Statements of Financial Position are shown
below for all three companies as at 31 July 2019. TZS

Statements of Financial Position as at 31 July 2019

Lowry Plc Moran Plc Lucas Plc

TZS million TZS million TZS million
Non-current assets:
Property, plant & equipment 758 326 159
Investments 1,200 40 25

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 1,958 366 184
Current assets:
Inventories 235 153 65
Trade receivables 188 134 42
Cash & bank 100 36 20
523 323 127

Total assets 2,481 689 311

Equity:
Equity share capital of €1 each 1,000 400 100
Other equity reserves 200 30 80
Retained earnings 977 112 70
2,177 542 250

Current liabilities:
Contingent consideration 38 --- ---
Trade payables 161 127 46
Taxation 25 20 15
Dividends proposed 80 --- ---
304 147 61

Total equity & liabilities 2,481 689 311

The following additional information should be taken into account insofar as it is relevant:

I. Lowry bought 320 million ordinary shares in Moran on 1 August 2018, when the other equity
reserves of Moran were €20 million and the retained earnings of Moran were €132 million.
The consideration was agreed at €800 million. This was satisfied by the issue of 200 million
equity shares by Lowry at an agreed fair valuation of €750 million, plus €50 million to be
paid by Lowry on 31 July 2019 if the profit target for the year (€15 million) was met by
Moran. The contingent element of the consideration was recorded at its fair value of €38
million at 1 August 2018. As it turned out, significant losses were incurred by Moran in

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 the year to 31 July 2019. Consequently, nothing is payable by Lowry on 31 July 2019 under
this part of the deal. No entry has been made by Lowry to reflect this change in expectation.
II. The group accounting policy is to value any Non-Controlling Interests (NCI) at their fair
value at the acquisition date. On the date, Lowry acquired its interest in Moran, the fair
value of the NCI in Moran was €130 million.
III. At 1 August 2018, some equipment held by Moran had a fair value €25 million in excess of
its carrying value. This equipment had a remaining useful economic life of 5 years at that
date.
IV. Lowry bought a 30% holding in the ordinary shares of Lucas on 1 August 2018, when the
other equity reserves of Lucas were €75 million and the retained earnings balance in Lucas’
books stood at €60 million. The consideration consisted of an immediate cash payment of
€112 million. Lowry exerts significant influence over Lucas as a result of this shareholding.
Other investments are held by all three companies. These are equity investments and not
more than 5% of the issued share capital is held in any of these individual entities.
V. During the financial year ended 31 July 2019, Moran sold goods to Lowry for €30 million.
These goods were sold at a mark-up on cost of 100%. Of these goods, 40% of these goods
remained in the inventory of Lowry at 31 July 2019: €2.5 million of the cost of these goods
remains unpaid by Lowry at 31 July 2019.
VI. No dividends were paid or proposed in the year by any of the companies.
VII. Due to the unexpected losses incurred by Moran during the year, an impairment review was
undertaken on 31 July 2019 and goodwill was found to be impaired by 60% of its
acquisition value. There was no impairment necessary in respect of the investment in
Lucas.
REQUIREMENT:

(a) Prepare the Consolidated Statement of Financial Position for the Lowry group as at 31
July 2019 in accordance with International Financial Reporting Standards.
(b) IFRS 3 - Business Combinations permits two methods for valuing non-controlling
interest at acquisition. Discuss how the initial calculation and subsequent treatment of
goodwill arising on the acquisition of Moran would have differed had the non-
controlling interest been measured using the proportionate share of the identifiable net
assets at the acquisition date. Recalculate the goodwill on this basis

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