Week 8 live online question

The draft summarised Statement of Financial Position at 31 March 2016 for three
entities, Ariel and Louis are given below:

Ariel Louis
£000 £000
Non-Current Assets
Property, plant and equipment 66,790 57,590
Investments:
36,000,000 Ordinary shares in Louis 75,590
Loan to Louis 12,600
154,980 57,590
Current Assets
Inventory 10,160 14,410
Current account with Louis 10,000
Trade receivables 21,400 13,200
Cash and cash equivalents 1,260 3,600
42,820 31,210
Total Assets 197,800 88,800

Equity and Liabilities

Equity shares of £1 each 126,000 48,000
Retained earnings 26,500 15,600
152,500 63,600
Non-Current liabilities
Long-term borrowings 32,700 12,600
Current liabilities
Trade payables 12,600 5,400
Current account with Ariel 0 7,200
12,600 12,600
Total Equity and Liabilities 197,800 88,800

Additional information:

(i) Ariel purchased 36,000,000 of Louis’s equity shares on 1 April 2014 for
£75,590,000 when Louis’s retained earnings were £7,680,000. Ariel also
advanced Louis a ten year loan of £12,600,000 on 1 April 2014.

(ii) It is the policy of Ariel to value non-controlling interests at fair value at the
date of acquisition. The market price of Louis’s shares at the date of
acquisition by Ariel was £3.

(iii) Ariel carried out an impairment review of the goodwill arising on the
acquisition of Louis and found that as at 31 March 2016 its goodwill had
been had been impaired by £10,000,000.
 (iv) The fair value of Louis’s property, plant and equipment on 1 April 2014
exceeded its book value by £1,300,000. The excess of fair value over
book value was attributed to buildings owned by Louis. At the date of
acquisition these buildings had a remaining useful life of 20 years. Ariel’s
accounting policy is to depreciate buildings using the straight line basis.

(v) At 30 March 2016 £90,000 loan interest was due on the loan made by
Ariel to Louis and had not been paid. Both Ariel and Louis had accrued
this amount at the year end in trade receivables and trade payables
respectively.

(vi) Louis posted a cheque to Ariel for £2,800,000 on 29 March 2016 which
did not arrive until 7 April 2016.

(vii) No dividends are proposed by any of the entities.

(viii) Ariel occasionally trades with Louis. In March 2016 Ariel sold Louis goods
for £4,800,000. Ariel uses a mark-up of one third on cost. On 31 March
2016 all the goods were included in Louis’s closing inventory.

Required:
Prepare the consolidated statement of financial position for Ariel group as at 31
March 2016.