Department of Accountancy 04

Faculty of Commerce & Management Studies

University of Kelaniya
Business Reporting, Governance and Ethics
Academic Year 2021/2022 – Year II Semester II

The Consolidated Statement of Financial Position (Cont.)

Recognition of Unrecorded Identifiable Intangibles

The acquirer should recognize, separately from the goodwill, the identifiable intangible assets acquired in
a business combination existing at the acquisition date.

Test 10
Following statements of financial position were taken from the books of ‘A’ Ltd and ‘B’ Ltd as
at 31st December 2021.
A Ltd B Ltd
Non-Current Assets

Property Plant & Equipment 240,000 200,000

Investment in B Ltd 220,000
Current Assets
Inventories 75,000 60,000
Trade Receivables 60,000 45,000
Cash 15,000 5,000

610,000 310,000
Equity and Liabilities

Equity - Ordinary shares 250,000 120,000

Retained Earnings 180,000 90,000

Current Liabilities 180,000 100,000

610,000 310,000

Following information is available.

1. A Ltd acquired 75% of the ordinary share capital in B Ltd on 1st January 2018, when the retained
earnings of B Ltd was Rs. 50,000.

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2. The fair value of a land of B Ltd was Rs.75,000 when the book value was Rs.60,000 as of the
acquisition date.
3. There was an intangible asset of Rs. 12,000 as of the acquisition date and it was not recorded in the
books of B Ltd. Life time of the intangible asset is 4 years.

You are required to prepare consolidate statement of financial position as at 31st December 2021.

Recognition of Contingent Liabilities

SLFRS 03 requires recognition of unrecognized contingent liabilities of the subsidiary company if their fair
value can be measured reliably. This is a departure from the normal rules in LKAS 37; which contingent
liabilities are not normally recognized, but only disclosed.

Test 11
Following statements of financial position were taken from the books of ‘A’ Ltd and ‘B’ Ltd as at 31st
December 2021.
A Ltd B Ltd
Non-Current Assets

Property Plant & Equipment 5,600 4,000

Less: Accumulated
Depreciation (1,200) (1,600)

Written down value 4,400 2,400

Investment in B Ltd 3,500

Current Assets
Inventories 2,800 1,600

Trade Receivables 3,200 1,900

Cash and cash equivalents 3,100 1,400

17,000 7,300
Equity and Liabilities

Equity - Ordinary shares 6,000 2,000

Retained Earnings 1,500 1,000

General Reserve 4,000 1,500

Non-Current Liabilities 3,000 1,500

Current Liabilities

Trade payables 1,500 800

Bank O/D 1,000 500

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 17,000 7,300

Following information is provided.

1. A Ltd acquired 75% of the equity shares in B Ltd on 1st January 2020, when B Ltd’s retained earnings
were Rs. 1,200 (debit balance)
2. The fair values of the assets and liabilities were almost equal to the book values except the followings.
PPE had a fair value of Rs. 2,000 higher than the book value. Inventories as of the acquisition date had
a fair value which was higher by Rs.600 than the book values.
3. There was a contingent liability as of the acquisition date at Rs. 1,100 and this was settled at Rs. 1,100
on 01.10.2020
4. Remaining life time of B’s PPE was 5 years.
5. The balance of the general reserve as of the acquisition date was Rs.1,000.
6. The fair value of NCI was Rs.3,500.
You are required to prepare the consolidated statement of financial position as at 31st December 2021.

Test 12
Following statements of financial position were taken from the books of ‘A’ Ltd and ‘B’ Ltd as
at 31st December 2021.
A Ltd B Ltd
Non-Current Assets

Property Plant & Equipment 14,000 5,500

Investments 17,000 4,500
Current Assets
Inventories 3,300 1,700
Trade Receivables 4,100 3,300
Pre-Payments 1,900 1,200
Cash 1,700 800

42,000 17,000
Equity and Liabilities

Equity - Ordinary shares 18,000 6,000

Retained Earnings 14,000 3,000

General Reserves 5,000 1,000
Non-Current Liabilities
10% Debentures 2,000 2,000
Bank Loans - 1,000
Current Liabilities
Trade Payables 1,900 1,700

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 Taxation 900 1,100
Accrued expenses 200 1,200

42,000 17,000

Following information is available.

01. A Ltd acquired 75% of the equity shares in B Ltd on 1st January 2021, when the assets and liabilities
had the following fair values.
a. Total non-current assets at fair value 16,000
b. Total current assets at fair value 5,000
c. Non-current liabilities 4,000
d. Current Liabilities 5,000
02. An extract of the income statement for the year ending 31st December 2021 is given as follows.
Profit before tax 10,000
Taxation (9,000)
Retained profit for the year 1,000
03. 50% of the fair value reserve to be allocated to a land. 30% is attributable to a plant and balance is
attributable to inventories. The additional depreciation charge required due to the fair value
adjustment is Rs.200/ per annum. The land fair valued on the acquisition date was sold on 1st October
2021.
04. B Ltd had an unrecorded intangible asset of Rs.3,000 and a contingent liability of Rs. 5,000 as of the
acquisition date.
05. The group amortizes the intangibles over 5 years’ time.
06. The fair value of the net asset attributable to non-controlling shareholders as at the acquisition date
was Rs.5,000

You are required to prepare the consolidated statement of financial position as at 31st December 2021.

Dividend Adjustment

Adjustment for dividends paid/ declared out of post-acquisition profits

LKAS 10 (Events after reporting period), specially states that the dividends paid to the ordinary
shareholders out of the profit of the year, be treated as a non-adjusting event occurred after the end of
reporting period. However there can be instances where, the dividends for ordinary shareholders are
declared before the end of reporting period and adjusted and shown as a liability in the statement of financial
position at the end of reporting period.

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Test 13
Following statements of financial position were taken from the books of ‘A’ Ltd and ‘B’ Ltd as at 31st
December 2021.
A Ltd B Ltd
Non-Current Assets

Property Plant & Equipment 1,500 1,200

Investment in B Ltd. 800
Current Assets
Inventories 150 100
Trade Receivables 200 70
Cash 50 30
2,700 1,400
Equity and Liabilities
Equity - Ordinary shares 400 300

Retained Earnings 900 350

General Reserves 600 200
Non-Current Liabilities
10% Debentures 125 275
Current Liabilities
Trade Payables 549 179
Dividend proposed 126 96

2,700 1,400

Following information is provided.

01. A Ltd acquired 80% of the equity shares in B Ltd on 01.01.2021 and the net assets position at the
acquisition date is given below.

Reserve balances as of the acquisition date

Retained earnings 300

General reserve 100
Fair value of overall net assets on the acquisition date 1,000

Any amount of fair value in excess of the book values of the net assets is attributable to a plant
that had a life time of 8 years as of the acquisition date.

02. The above net assets total does not include the fair value of an intangible asset that had a fair value of
an intangible asset that had a fair value of Rs. 50/. The group amortizes intangible assets over 5 years.
03. The dividends in both companies have been declared out of the profits in 2021.

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You are required to prepare the consolidated statement of financial position as at 31st December
2021.

Test 14

Following statements of financial position were taken from the books of ‘A’ Ltd and ‘B’ Ltd as at 31st
December 2021.
A Ltd B Ltd
Non-Current Assets

Property Plant & Equipment 1,100 1,000

Investment in B Ltd. 1,400
Current Assets
Inventories 350 270
Trade Receivables 160 130
Cash 110 100
3,120 1,500
Equity and Liabilities
Equity - Ordinary shares 1,250 600

Retained Earnings 300 250

General Reserves 400 150
Non-Current Liabilities
10% Debentures 700 100
Current Liabilities
Trade Payables 170 190
Dividend proposed 150 150
Bank O/D 150 60
3,120 1,500

Following information is provided.

01. A Ltd acquired 75% of the equity shares in B Ltd on 01.01.2020 and the net assets position at the
acquisition date is given below.

Reserve balances as of the acquisition date

Retained earnings 200

General reserve 100
Fair value of overall net assets on the acquisition date 1,100

02. The above fair value of the net assets does not include Rs. 150/- worth of an intangible asset and Rs.
50/- fair valued contingent liability.

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03. Any fair value amount in excess of the book value should be attributable to inventories by Rs.40/- and
the balance to plant and machinery that had a 5 years life time from the acquisition date.
04. The dividend proposed in both companies are out of the profits of 2021.

You are required to prepare the consolidated statement of financial position as at 31st December 2021.