HNDA 3rd Year _2nd Semester 2016

Advanced Financial Reporting

Model Answers

Question No 01
King Group
Consolidated Statement of Financial position
As at 31st March 2016

Adjustments Consolidated
Non-current assets
+20000 (Rev)-1000(Dis Inc) +250 (Add
PPE 420,000.00 Dep) 439,250.00

Goodwill - 45000+3300 (GW)-5000-2000 (Imp) 41,300.00

Trade Mark - +10000 (Rev)-6000 (Amo) 4,000.00

current assets -

inventory 73,000.00 -1200 URP 71,800.00

Trade receivable 49,000.00 49,000.00

current account 8,500.00

Dividend Receivable 4,400.00 -1500*75%-1000*80%-1000*10% (ICD) 2,375.00

cash and cash equivalent 32,100.00 32,100.00

639,825.00

Equity and liabilities -

Stated capital 299,965.00 219,965.00

Retained Earnings 224,000.00 159,460.00

Other reserves 47,000.00 15000+25000*75%+7000*70% 38,650.00

Non-controlling interest - 60125 60,275.00

Noncurrent liabilities -

Bank loan 82,000.00 82,000.00

leasing Creditors 48,500.00 -2500 (Cap Por) 46,000.00

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

Current Liabilities -

Trade payable 32,000.00 32,000.00

current account 5,000.00 +3500 (Ins)

Dividend payable 3,500.00 -1500*75%-1000*80%-1000*10% (ICD) 1,475.00

639,825.00

King Group
Consolidated Statement of Financial position
As at 31st March 2016

Adjustments Consolidated

Revenue 1,120,500.00 -8000-10000 (ICS) 1,102,500.00

Cost of sales 628,500.00 -8000-10000 (INP) + 1200 (URP) 611,700.00

Gross Profit 492,000.00 490,800.00

Other income 54,000.00 -1000 (Dis inc) 53,000.00

+6000(Amo)-250 (Add
Administrative expenses 150,000.00 Dep)+7000(Imp) 162,750.00

Distribution cost 277,000.00 277,000.00

Finance cost 18,000.00 +4965 (Int)+1000(Fin cha) 23,965.00

Profit before interest and tax 101,000.00 80,085.00

Tax expenses 34,000.00 34,000.00

Profit after tax 67,000.00 46,085.00

Attributable for -
(13000-8000)*25%+(8000-
NCI 1750)*30 3,125.00

Equity shareholders of parent 42,960.00

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

Other comprehensive income -

transaction gain on foreign
operation 32,000.00 32,000.00

Total Comprehensive income 99,000.00 80,085.00

Attributable for

NCI 1250+15000*25%+1875+7000*30% 8,975.00

Equity shareholders of parent 71,110.00

CI (K-Q)
Investment 99,965.00 SC 40,000.00
- interest Exp. (4,965.00) RE 20,000.00
FV of NCI 40,000.00 REV 30,000.00
Goodwill 45,000.00
135,000.00 135,000.00

NCI (K-Q)
FV of NCI 40,000.00
RE(23000*25%) 5,750.00
OR(25000*25%) 6,250.00
52,000.00

CI(K-B)
Investment
King 5,000.00 SC (40000*70%) 28,000.00
Queen (50000*75%) 37,500.00 RE (16000*70%) 11,200.00
3,300.00
42,500.00 42,500.00

NCI(K-B)
Investment (50000*25%) 12,500.00 SC (40000*30%) 12,000.00
RE (16000*30%) 4,800.00
RE(6250*30%) 1,875.00
OR(7000*30%) 2,100.00
8,275.00
20,775.00 20,775.00

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

Consolidated RE
RE of King as at 31st March 2016 145,000.00
Plus 17,250.00
RE-Queen (23000*75%) 4,375.00
RE-Bishop (6250*70) 166,625.00

Minus 4,965.00
Interest Expenses 1,200.00
URP on stock 1,000.00
URP on assets 7,165.00
159,460.00

RE of Queen
As at 31st March 2016 55,000.00
-Pre 20,000.00
Post 35,000.00
-Amortization (6,000.00)
-Interest (1,000.00)
.-Impairment (5,000.00)
23,000.00
RE of Bishop
As at 31st March 2016 24,000.00
Pre 16,000.00
Post 8,000.00
-Additional Dep 250.00
-Impairment (2,000.00)
6,250.00

Interest Expenses
NV of investment 99,965.00
PV of Investment (80000+19965/1.1^3 95,000.00
4,965.00

Revaluation- Queen
FV of NIA 90,000.00
-BV of NIA (40000+20000) 60,000.00
30,000.00

Amortization (10000/5*3) 2,000.00

URP on stock

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

Queen (8000*25%/125*25) 400.00

Bishop (10000*40%/125*25) 800.00

URP on Assets (5000-4000) 1,000.00

Additional Dep (1000*25%) 250.00

Question No 02
Ratio Calculation
Industry
Ratios 2014/2015
Average 2015/16
Gross Profit Margin 28% 40% 35
Net Profit margin 8% 18% 12
Return on capital employed (ROCE) 16% 22% 18.35
Return on shareholders fund 21% 28% 25
Current Ratio 2.5:1 2:1 1.5
Quick Ratio 1.5:1 1:1 1.20
19.12
Inventory Turnover times 12 Times 13 Times
Times
Debtor Turnover Times 22 Times 20 Times 10 Times
Creditor Turnover Times 15 Times 13 Times 20 Times
Rs.
Earnings per share (EPS) Rs 4.70 Rs.8
5.00
Price earnings ratio 3 Times 7 Times 6 times

Question No 03
Question No. 03 (15 Marks)
I.
a. Government
Refers to government, government agencies and similar bodies whether local, national or
international.
b. Capital Grant
Government grants whose primary condition is that an entity qualifying for them should
purchase, construct or otherwise acquire long-term assets.
c. Forgivable Loan
Loans which the lender undertakes to waive repayment of under certain prescribed
conditions (6 Marks)
II.
 The entity will comply with the conditions attaching to them; and

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

 The grants will be received.(2 Marks)

III.
Capital Grant should be against cost of the assets or as separate deferred. If Capital grant
recognised as deferred income it should be credited to income statement throughout useful
life of the assets according to pattern of usage of the asset. (3 Marks)
IV.
Revenue grant of 8 million should be credited to income statement as follows

2015/16 8*10/20 = 4
2016/17 8*5/20 = 2
2017/18 8*3/20 = 1.2
2018/18 8*2/20 = 0.8 (4 Marks).

Question No. 04 (15 Marks)

I. Operating segment is a component of an entity:

 that engages in business activities from which it may earn

revenues and incur expenses;
 whose operating results are regularly reviewed by the
entity’s CODM to make decisions about resources to be
allocated to the segment and assess its performance; and
 For which discrete financial information is available

Operating segment which meets quantitative thresholds can be

recognized as reportable segment. (4 Marks)
II. Reported revenue (external and inter-segment) is 10% or more of the combined revenue of
all operating segments;

The absolute amount of the segment’s reported profit or loss is 10% or more of the greater
of:
a. the combined reported profit of all operating segments that did not report a loss,
and
b. the combined loss of all operating segments that reported a loss;

The segment’s assets are 10% or more of the combined assets of all (4 Marks)

III. The CODM is a function and not necessarily a person. That function is to allocate resources
to, and assess the performance of, the operating segments. (2 Marks)

IV. Two or more operating segments may be combined as a single reportable segment if:
 aggregation provides financial statement users with information that
allows them to evaluate the business and the environment in which it

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

operates;
 they have similar economic characteristics; and
 they are similar in each of the following respects:
 the nature of the products and services,
 the nature of the production processes,
 the type or class of customer for their products and services,
 the methods used to distribute their products or provide their services,
and
 The nature of the regulatory
(3 Marks)
V. After determining the reportable segments, the entity should ensure that the total external
revenue attributable to those reportable segments is at least 75% of the entity’s total
revenue. When the 75% threshold is not met, additional reportable segments should be
identified (even if they do not meet the 10% thresholds), until at least 75% of the entity’s
total external revenue (2 Marks)

Question No. 05 (15 Marks)

I.
a. Biological assets
A living animal or plant.

b. A group of biological assets

An aggregation of similar living animals or plants.

c. Agriculture produce
The harvested product of the entity’s biological assets.
(6 Marks)
II.
The entity controls the asset as a result of past events;
It is probable that future economic benefits associated with the asset will flow to the entity
The fair value or cost of the asset can be measured reliably. (3 Marks)
III.
Value of cattle on 31st March 2016 (300*100000) = 30,000,000
Value of cattle on 1st April 2014 (300*20000) = 6,000,000
Total Fair value changes = 24,000,000

Value of one year old cattle on 31st March 2016 (300*30000) = 9,000,000
Less
Value of one year old cattle on 1st April 2015(300*20000) = 6,000,000
Fair value change due to price change = 3,000,000

Total Fair value change = 24,000,000

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HNDA 3rd Year _2nd Semester 2016
Advanced Financial Reporting
Model Answers

Less
Fair value change due to price change = 3,000,000
Fair value change due to physical change = 21,000,000 (6
Marks)

Question No. 06 (15 Marks)

I.
a. Employee benefits are all forms of consideration given by an entity in exchange
for service rendered by employees.

b. Short-term employee benefits are employee benefits (other than termination

benefits) that are due to be settled within twelve months after the end of
the period in which the employees render the related service.

c. Post-employment benefits are employee benefits (other than termination

benefits) which are payable after the completion of employment.
(6 Marks)
II.
Defined contribution plans are post-employment benefit plans under which an entity
pays fixed contributions into a separate entity (a fund) and will have no legal
or constructive obligation to pay further contributions if the fund does not hold
sufficient assets to pay all employee benefits relating to employee service in the
current and prior periods. Ex. EPF and ETF

Defined benefit plans are post-employment benefit plans other than defined
contribution plans. Ex. Gratuity (3 Marks)
III.
a. Interim period is a financial reporting period shorter than a full financial year.
b. Interim financial report means a financial report containing either a complete set
of financial statements (as described in LKAS 01, Presentation of Financial
Statements) or a set of condensed financial statements (as described in this
Standard) for an interim period.(3 Marks)
IV.
Condensed Statement of Financial Position
Condensed Statement of comprehensive income
Condensed Statement of changes in equity
Condensed Cash flow statement; and
explanatory notes (3 Marks)