ACCA

Dec-18

1 (a) (i) Calculation of Cash generated from operations - Indirect method

Profit before tax 209 ok

Adjustment for
1- Share of profit of associate -67 ok
2- Depreciation 99 ok
3- Service Cost component 24 ok

4- Impairment loss of goodwill 10 ok

5- Impairment loss of PPE 23 ok

6- Impairment and forex loss on Inventory 6 ok

7- Adjustment for net current asset

Decrease of Inventory 39 =165-126-6=33
Increase of trade receivable -7 ok
Increase of trade payable 18 ok
Contribution paid -15 ok
Tax paid
Interest paid

Cash generated from operations 339

(ii) Explaination of specific adjustment required to the group PBT to calculate Cash generated froom op

Cash generated from operation derived from the main trading activities of the company, including ca
Indirect method (in this case) will start from PBT and adjust any non-cash inflow/outflow, then adjust

1- Share of profit of associate related to investing activities rather than operating activities, and also it's

2,3,4,5,6

Sep-18
4 Net cash generated from operating activities YE 31 Aug 20X8
Per book Adjustment Final
Cash generated from operating activities 345 345
Income taxes paid -21 -21
Pension deficit payments -33 -33
Interest paid -25 18 -7
(ii) Associate share of profits 12 -12 -4
(ii) Associate share of profits 0 -4 -4
(i) Disposal of cars (inventory) 30 30
(iii) Loss in net cash inflow - forex revaluation 28 28
(iv) Contribution to pension plan
 Cash tax benefit of pension plan assets 6 6
Net cash generated from operating activitie 278 66 344

Net cash generated from investing activities

Interest received 10
Interest paid -18
??? Net capital expenditure 46

(i) Included Cash inflows - disposal of cars 30 -30

(ii) Dividend received 0 1
(ii) Purchase of associate (W1) 0 -20

Net cash generated from operating activities YE 31 Aug 20X8 344

Net capital expenditure -46
Purchase of associate -20
Dividend received 1
Interest received 10
Interest paid -18
Pension deficit payments 27
Free cashflow 298

$m Explaination
Net cash from operating activities per Question 278
(i) Cashflows from disposals of cars 30 Once these cars have been t
(ii) Associate profit -16 Income from the associate s
(iii) Forex exchange loss 28 This is non-cash expenses a
(iv) Cash tax benefit from pension plan 6
(v) Interest paid capitalised to PPE - investing CF 18
Net cash from operating activities 344

Free cashflow reconciliation

Adjusted cashflow from operating 344
Payment to buy associate -20 The cash effect of the purch
Dividend from associate 1 The dividend from associate
Interest received 10 Figure as given and included
Interest paid -18 Adjust the interest paid rela
Capital expenditure -46 Figure as given and included
Exceptional pension contribution 27 Exception items are exclude
Free cashflow 298

Sep-Dec-19
1 Year-end 30 June 20X8

Luploid Co Colyson Co - 80% on 1 July 20X4 (4 years)

Hammond Co - 60% on 1 July 20X7 (1 year)
(a) (i) How the fair value of factory site should be determined at 1 July 20X4
Under IFRS 13- Fair value measurement, it defined that fair value of asset is the price expected to rec
The fair value can be measured by the market price and cost to bring the asset into condition and loc

In case of Luploid Co, the factory site was purchased before acquisition. The Land and Property has in
FV would be 24-1 =23 mil
FV of identifiable net assets at acquisition would be 65+23 = 88mil

Why depreciated replacement cost of 17.4m is unlikely to be a reasonable estimate of FV

Depreciated replacement cost should only be considered as possible method for estimating FV of asss
This may be when asset is highly specialised and market data is limited/unvailable.

In this case, the rise in value of land particularly for residential use > mean that to use depreciated rep
The exit value for the asset, whether it was based on principal/most advantageous market, would nee
Depreciation may not also be an accurate reflection of all forms of obsolescence including physical de

(ii) Calculate goodwill arising on acquisition of Colyson Co. NCI measured ad FV/ Proportionate share of n

FV method Proportionated method

Cash consideration 90 Cash consideration
FV of NCI 22
Less Net identifiable asset -88 Less FV of net asset
Goodwill 24 Goodwill

(b) Discuss the calculation and allocation of Colyson's impairment loss at 30 June 20X8
Why impairment loss of Colyson will differ depending on how NCI are measured

IAS 36 - Impairment of assets: Impairment loss arises where Carrying amount of net asset exceeds rec
When there is indicator of impairment, the assess need to be assessed and reduced to recoverable am
Where cashflow can not be determined independently for individual assets, they should asset CGU w
Impairment of CGU are allocated first to goodwill and then pro rata to other asset
In this case, Colyson incurred losses, building had been damaged and impaired.
FV method
Total carrying amount of net asset = 106 + goodwill (24) = 130, as recoverable amount is 100, it needs
Original vaImpairment loss Revised CV
Land and building 60 4.00 56.00
Other Plant and machinery 15 1.25 13.75
Intangible other than goodwill 9 0.75 8.25
Goodwill 24 24.00 -
Current asset (recoverable amount) 22 - 22.00
Carrying amount of net asset 130 30.00 100
 Proportionated method
Total carrying amount of net asset = 106 + grossed up goodwill (24.5) = 130.5, as recoverable amount
Land and building 60 4.00 56.00
Other Plant and machinery 15 1.25 13.75
Intangible other than goodwill 9 0.75 8.25
Goodwill (grossed up = *100/80) 19.6 19.60 -
Notional goodwill 4.9 4.90 -
Current asset (recoverable amount) 22 - 22.00
Carrying amount of net asset 130.5 30.50 100

© (i) How the consideration for the acquisition of Hammond should be measured on 1 July X7

Deferred share consideration 72

Pre-combination service 9 Post combination service period means that t
Total consideration 81

(ii) How much of an expense for share-based payment scheme should be recognised in consol PnL YE X8

100 options x 10,000 employee x FV of option at grant date (20) * 90% (1-10% staff would leave over
FV of replacement scheme at grant date 18
As 9 millon has been allocated to cost of investment
' => remaining should be treated as part of post-combination remuneration package, measured in ac
FV at grant date >> Expensed to PnL over 2 year vesting period, subsequent changes to FV of share ar

- Reason why the scheme is equity or cash settled => equity settled
- Vesting period: expense must be spread out over vesting period => 2 years
- FV of share at grant date
- No of option of share expected to vest
- IGNORE share price condition (market condition)

Dr PnL / Cr Equity

2 (a) (i) Dr. Cash

Cr. Advance from customer / Unearned revenue / Contract liability
 Dinar Dollar
Inventory 80 16
Reassed at year-end 80 13.33333
Net realisable value 60 10

Forex loss 2.666667

Realisable loss 3.333333
6

Cash generated froom operation

the company, including cash receipt from customers, cash paid to suppliers, cash paid to employee. There are 2 types of cashflow, wh
nflow/outflow, then adjust movement of net current assets

ting activities, and also it's a non-cash transaction, so it should be excluded

Capitalised to PPE -> investing

Incorrectly included
non cash
inflow
non cash
outflow
 inflow

Capitalised to PPE -> investing

adjust to operating As PPE was available for sales, they have been transferred to Inventory. The cash inflows relating to d
inflow
outflow (W1) Associate

OB 0
Adjusted Cash Consideration - pu 20
Adjusted Dividend receipt -1
Adjusted Profit after tax of assoc 4
Adjusted CB 23
Adjusted
Exceptional items

nce these cars have been transferred to inventory, the sales proceeds should have been treated as revenue and so would be part of op
come from the associate should not be included in operating activities. The dividend - not the profit - from the associate should be inc
his is non-cash expenses and should be added back to operating activities

he cash effect of the purchase of associate is the original amount paid to purchase it and this is defined by Daveed as an adjustment to
he dividend from associate should also be included in the free cashflow as defined (25%*4)
gure as given and included in FCF
djust the interest paid relating to PPE, included in FCF
gure as given and included in FCF not add back
xception items are excluded from FCF so pension payments net of tax saving is added back (33-6)

X4 (4 years)
20X7 (1 year)
s the price expected to receive when the company sell the asset between martket participants at measurement date
sset into condition and location for use/sell

e Land and Property has increased significantly with martket price of 24m, asset retirement obligation (ARO) and planning permission

e estimate of FV Ised for specialised assets

od for estimating FV of assset when other more suitable methods are not available

that to use depreciated replacement cost would undervalue the asset

tageous market, would need to be the same as entry price
cence including physical deterioration

V/ Proportionate share of net asset

roportionated method
ash consideration 90

ess FV of net asset -70.4

19.6

Impairment indicator
Lower of recoverable amount & Carrying amout
Cash generating unit (Subsidiary normally a CGU)
Allocation Asset obviously impaired
Goodwill
Other non-current asset
Allocation FV - shared between group/ NCI
Partial - Group

nt of net asset exceeds recoverable amount

reduced to recoverable amount, which is higher of either Value in use or
s, they should asset CGU which is the smallest group of asset independently generated cashflow

ble amount is 100, it needs to be impaired by 30 (130-100) mil

no asset should be reduced below its recoverable amount

0.5, as recoverable amount is 100, it needs to be impaired by 30.5 (130.5-100) mil

>> Notinal goodwill and impairment of notional goodwill is not recognised in Consolidated FS (it's notional amount, not

ed on 1 July X7

ervice period means that the % of replacement scheme attributable to pre-combination service = market value of acquiree * ratio of p

gnised in consol PnL YE X8

0% staff would leave over the vesting period)

n package, measured in accordance with IFRS 2 - Share-based payment

t changes to FV of share are ignored
2 types of cashflow, which is indirect and direct method.
cash inflows relating to disposal of cars would be an operating activities and should not be treated as investing activities

d so would be part of operating cashflow

e associate should be included in investing activities

eed as an adjustment to free cashflow

nd planning permission for conversion of 1m
s notional amount, not actual amount)

e of acquiree * ratio of portion of vesting period completed to greater of total vesting period of original vesting period of acquire awar
ting period of acquire award
1 THE ACCOUNTING FRAMEWORK

2 EXPOSURE DRAFT (ED/2015/3)

3 REVISED CONCEPTUAL FRAMEWORK

4 EXPOSURE DRAFT (ED/2015/3)

5 PROFESSIONAL AND ETHICAL OF ACCOUNTANT

6 IAS 24 RELATED PARTIES

7 IAS 8 ACCOUNTING POLICIES, CHANGES IN ACCOUNTING ESTIMATES AND ERRORS

8 IAS 34 INTERIM FINANCIAL REPORTING

9 IFRS 15 REVENUE FROM CONTRACT WITH CUSTOMER

5 steps for revenue recognition

(1) - Identify contract with customer
+ approved by both parties
+ rights & obligations are clearly defined
+ payment term (amount, time) can be identified
+ contract has commercial substance (risk, timing, value)
+ It's probable that entity wil collect the consideration
(2) - Identify performance obligations
+ to provide a distinct good/ service or a series of distinct goods/ se
+ distint: can be sold seperately

Warranty Assurance warranty (Free warranty)

Service warranty (Paid warranty)

(3) - Define transaction price

3.1 - Consideration that the entity is expected to receive, exclude an
 + Expected value
(> 2 possible outcomes)

+ Most likely amount

(2 possible outcomes)

Principal & Agent

Agent
Control
A → B
90m
>> Revenue =100 >> Revenue = 100
COGS= (10)

3.2 - Variable consideration should be included if highly probable

Eg 1: A contract: 100$
constructing building, 2 years
can get premium 10% after finish

Eg 2: A sell 50$ gift card to customers to purchas

No requirement to remit any unuse gift card
Based on significant past experience, A estim

Sell gift card

3.3 - Transaction price should take into account Time value of cash
Eg: Year 0 - Sale
Dr. Receivable =110/ 1.1 = 100
Cr. Sales = 100

3.4 - Any amount paid to customer -> treat as reduction in transacti

Eg 1: Sell 100$, cash back 10$ >> Transaction pric

paid 10$ to revamp the shop

Eg 2:
 A

Paid 70$

3.5 - Non cash consideration >> Transaction price = FV of considerati

Product X
Eg:
A

Product Y
(4) - Allocate transaction price to PO
+ based on the relative standalone selling price of each goods/servic
+ If Transaction price includes a variable amount & discount, they ca

A 8000
B 2000
10000

(5) - Recognise revenue when PO is satisfied

+PO is satisfied when control of goods/services is transferred
+ ability to direct use of asset
+ obtain substantially all remaining benefits from the
+ Control transferred indicator:
+ present right to payment for the asset
+ entity has transferred physical possession of asset
+ customer has legal title to the asset

+ Recognise Overtime = Percentage of completion

- Customer simultaneously receive & consume the be
- Entity's performance create/ enhance an asset unde
- Entity's performance does not create an asset with a

+ Recognise Point in time Recognise if it fails overtime crit

- Entity has present right to payment
- Customer has legal title to asset
- Entity has transferred physical possession of the ass
- Customer has significant risks and rewards of owner
- Customer has accepted the asset

Contract costs
Incremental costs of obtaining a contract
Cost to fulfil a contract
If they are not within scope of IAS 2 - Inventory/ IAS 16- PPE, IAS 38
+ Cost relate directly to a contract - the entity can specifically identif
+ Cost generate or enhance resources of entity - will be used in satis
+ Cost expected to be recovered
 Special cases
Sales with right of return >> commission
Only recognise revenue for the transferred products = consideration entity expect t
Principal vs Agent
If entity controls the goods before transfer to customer
Revenue = Gross amount of consideration
- Entity is primarily responsible for fulfilling the promise to provide g
- Entity has inventory risk
- Entity has discretion in establishing price for specific goods
If entity arranges for goods to be provided by other party
Revenue = Fee/ Commission

Non-refundable upfront fee > an advance payment

> Recognise revenue when future goods provided

10 IAS 16 PROPERTY, PLANT AND EQUIPMENT

11 IAS 36 IMPAIRMENT OF ASSETS Applies to all asset, except for

12 IFRS 13 FAIR VALUE MEASUREMENT

13 IAS 38 INTANGIBLE ASSETS

14 IAS 40 INVESTMENT PROPERTY

15 IAS 23 BORROWING COSTS

16 IAS 21 THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES

17 IFRS 16 LEASING Unconditional right to use of a specific asset

Lessor Lessee
<Owner> <User>
Lessee accounting
Consideration
Lease (1) Lease Exception (2)

Asset
FV = 100m
Life = 10 years
Lease term = 4 years
Rentals = 15m
Guaranteed residual value = 60m
Lessee guarantee that asset will be sold in the market = 60m. If nobo
After lease term, Residual value (RV) = 90m => Unguaranteed RV = 30
Interest rate = 10%
Implicit rate : rate charged by lessor
Incremental borrowing rate
Year 0 Dr. Right to use (RTU) 88.53 PV of all future lease payment
Cr. Lease liability (LL) 88.53

Year 1-4 Dr. Finance cost 8.85 Dr. Finance cost

Dr. Lease liability (LL) 6.15 Dr. Lease liability (LL)
Cr. Bank 15.00 Cr. Bank

Dr. Depreciation expenses 7.13 = (RTU - Guaranteed RV) / Lease

Cr. Right to use (RTU) 7.13 x4 years

Year 4 Pay Guaranteed RV -> Buy Asset Return the asset

Dr. Lease liability (LL) 60.00 Dr. Lease liability (LL)
Cr. Bank 60.00 Cr. Right to use (RTU)
Dr. Asset 60.00
Cr. Right to use (RTU) 60.00

Lease accounting - Lessee

Year 0 Dr. Right to use (RTU) xx PV all all future CFs (lease payment + ungua
Cr. Lease liability (LL) xx

Dr. Right to use (RTU) xx Amount paid immediately (upfront paymen

Cr. Bank xx + Initial direct cost: transportation, site pre

Dr. Right to use (RTU) xx PV of Dismantled cost

Cr. Provision for dismantlinxx

Dr. Asset (incentive) xx Proportional amount

Cr. Right to use (RTU) xx Eg: Buy A get B

Year 1 onwards
Dr. Finance cost xx Implicit rate /
Dr. Lease liability (LL) xx
Cr. Bank xx

Dr. Depreciation xx RTU - Guaranteed.RV

Cr. Right to use (RTU) xx Useful life

2- Lease exception Short-term =< 12 months Lease payments are recorded as an expense
Low value =< 5000$

Expenses = Lease rentals + Direct cost - Incentive

Lease terms

3- Sales and lease back

 Transfer is a sale

Dr. Bank xx Sales proceeds

Dr. Right to use xx = CA * % retained
= CA * PV of lease payment/ FV
Cr. Lease Liability xx PV of all future lease payment
Cr. Asset xx CA
Cr. PnL xx Balancing figure

Lessor accounting

Finance Lease Operating Lease

+ Non-manufacturer Record Income = Rentals on straight line basis
+ Manufacturer

Non - manufacturer (Bank/ leasing company)

Year 0
Dr. Finance Lease Receivable xx = Net investment in lease
Cr. Asset xx = Present value of Rental + RV (both GRV and UnGRV
<Gross investment in lease>
Year 1 onwards

Dr. Bank xx
Cr. Finance Lease Receivable xx
Cr. Interest income xx > implicit rate

18 IFRS 9 FINANCIAL INSTRUMENT

Financial Asset
Cash
Equity instrument of another entity
Contractual right to receive cash/ another financial asset + Receivable
+ Loan notes (acquired)
+ Debentures
to exchange FA/FL uder terms potentially favourable to the entity
A contract can be settled in an entity's own equity instrument, entity is obliged to RECEIVE a variable its

Own share
Receive Issue
Fixed Variable Fixed Variable

Dr. Equity Dr. Financial Asset Dr. Asset Dr. Asset

Cr. Asset Cr. Asset Cr. Equity Cr. Financial Liability
IAS 32 IFRS 9 IFRS 2 IFRS 9
 >> Record sales & provision >> Not record sales until cash is received

Customer difficulty
an be identified
nce (risk, timing, value)
ct the consideration

ce or a series of distinct goods/ services that are substatially the same

Eg1: Company X Company Y
A >< A
B competitor B
combined seperately
>> 1 PO, A & B are not distinct >> 2 PO, A & B are distinct

Eg2: A can be sold seperately

B can only be sold with A
(Free warranty) IAS 37 - Provision >> 2 PO, A & B are distinct
No separate charge for warranty (FOC)
If customer does not have option to purchase warranty seperately

id warranty) IFRS 15 - Revenue

Separate PO, is billed seperately, not free
If warranty provides customer with a service in addition to the assurance that product complies w
If customer has option to purchase warranty seperately

is expected to receive, exclude any cash receipt on behalf of others

 Eg1: Expectation 40% get sales 100$ 40
30% get sales 70$ 21
30% get sales 50$ 15
76 >> transaction price = EV = 76
Eg2: 2 years 1000$m Delay
Building Penalty 10$/ day >> Transaction price = EV (many possible ou

Eg1: 2 years 1000$m Delay >> If the company believe most likely outco
Get premium 10$ Building Penalty 10$ >> If the company doesn't have most likely o

Principal

→ C Control Control
100m A → B → C
>> Revenue = 100 90m 100m
>> Revenue =90 >> Revenue = 100

d be included if highly probable

contract: 100$ B >> Revenue = 108 Fixed = 100
constructing building, 2 years Variable = 100*10%*80% =8 (highly probable)
can get premium 10% after finishing, 80% chance Year 1 Year 2
complete 60% complete 40%
>> Revenue = 108*60% >> Revenue = 108*40%
gift card to customers to purchase any products, expire after 12 months
ement to remit any unuse gift card.
significant past experience, A estimate 70% will be redeemed, 30% will expire unused

Use 70% Expire 30%

Fixed revenue = 70%*50= 35
Variable = 30%*50= 15
significant past experience => probable
>> Record revenue 50$ for 70% voucher used
>> Each voucher 1$ record revenue of 50/35 = 1.4$
not have past experience
>> Record revenue 35$ when use, record 15$ when expire
into account Time value of cash
Year 1 - Receive cash 110$ Year 0 - Receive cash 100 Year 1 - Sale
able =110/ 1.1 = 100 Dr. Receivable = 10 Dr. Bank = 100 Dr. Finance cost = 10
Cr. Interest income = 10 Cr. Unearned revenue = 100 Cr. Unearned revenue = 10

Dr. Bank = 110 Dr. Unearned revenue = 110

Cr. Receivable = 110 Cr. Sales = 110

r -> treat as reduction in transaction price

cash back 10$ >> Transaction price = 90

o revamp the shop

 B >> Transaction price = 70-10 = 60$

ansaction price = FV of consideration received

B >> Transaction price of X = FV of Y

e selling price of each goods/services

riable amount & discount, they can be allocated to one/more PO
Discount 1000 Specific product discount (B) No specific product discount (B)
7000 8000 7200
2000 1000 1800
9000 9000 9000

oods/services is transferred

y all remaining benefits from the asset

ayment for the asset

red physical possession of asset
l title to the asset

= Percentage of completion
neously receive & consume the benefit
ce create/ enhance an asset under control of customer
ce does not create an asset with alternative use

Recognise if it fails overtime criteria

right to payment
l title to asset
red physical possession of the asset
ficant risks and rewards of ownership
pted the asset

2 - Inventory/ IAS 16- PPE, IAS 38- Intangible asset, asset only recognised if they meet all criteria
- the entity can specifically identify
rces of entity - will be used in satisfying PO in future
cts = consideration entity expect to be entitled (not product expected to be returned)

>> Principal

fulfilling the promise to provide goods

ng price for specific goods

>> Agent

when future goods provided

of a specific asset

FV of (Lease payment + Guranteed RV) Movement of lease liability

Year CF DF PV Year OB Interest Rentals
Y1-4 15 3.17 47.55 Y1 88.53 8.85 (15.00)
Y4 60 0.683 40.98 Y2 82.38 8.24 (15.00)
88.53 Y3 75.62 7.56 (15.00)
Y4 68.18 6.82 (15.00)
sold in the market = 60m. If noboday buys, Lessee will buy
V) = 90m => Unguaranteed RV = 30m Movement of RTU
Year OB Depre
Y1 88.53 (7.13)
Y2 81.40 (7.13)
 Y3 74.27 (7.13)
PV of all future lease payment Y4 67.13 (7.13)

Dr. Finance cost 8.24 Dr. Finance cost 7.56 Dr. Finance cost
Dr. Lease liability (LL) 6.76 Dr. Lease liability (LL) 7.44 Dr. Lease liability (LL)
15.00 Cr. Bank 15.00 Cr. Bank

= (RTU - Guaranteed RV) / Lease term

Return the asset

Dr. Lease liability (LL) 60.00
Cr. Right to use (RTU) 60.00

uture CFs (lease payment + unguaranteed RV)

aid immediately (upfront payment)

irect cost: transportation, site preparation cost, consultancy cost…

mantled cost

StandaloneTransaction price
1600 Leased value 8000 6400
1600 Incentive 2000 1600

Incremental borrowing rate

ranteed.RV
+ Asset is transferred to lessee Useful life After lease term 4 years, we're going to use
+ Asset is returned to lessor Lower of Useful life & lease term

ments are recorded as an expense over lease term

 Transfer is NOT a sale

Dr. Bank xx
Cr. Financial Liability xx

Manufacturer Asset being sold should be recorded as sale of inventory

Dr. Finance Lease Receivable xx

ental + RV (both GRV and UnGRV) Cr. Sales xx
<Gross investment in lease> Dr. COGS xx
Cr. Inventory xx

Financial Liability

+ Receivable Contractual right to deliver cash / another financia

+ Loan notes (acquired)
+ Debentures
able to the entity to exchange FA/FL uder terms po
obliged to RECEIVE a variable its own equity instrument A contract can be settled in an entity's own equity inst

Cr. Financial Liability

until cash is received

d seperately
be sold with A

assurance that product complies with agreed-upon specification

ction price = EV (many possible outcomes)

ompany believe most likely outcome = 110 > Transaction price = 110
ompany doesn't have most likely outcome> Transaction price = Expected value

*80% =8 (highly probable)

ue = 108*40%

Year 1 - Sale
Dr. Finance cost = 10
Cr. Unearned revenue = 10

Dr. Unearned revenue = 110

Cr. Sales = 110
 CB
82.38 >> Current liability 6.76
75.62 >> Non-current Lease liability 75.62
68.18
60.00

CB
81.40
74.27
 67.13
60.00

6.82
8.18
15.00

e term 4 years, we're going to use it for remaining 6 yrs

4 years
rded as sale of inventory

= Net investment in lease

= Lower of Cost/ NRV

to deliver cash / another financial caset

to exchange FA/FL uder terms potentially unfavourable to the entity

ttled in an entity's own equity instrument, entity is obliged to DELIVER a variable its own equity instrument
#tag Question
CONSOLIDATED 1 Marchant YE: 30 April 20X4
Marchant
Revenue 400
Cost of sales -312
Gross profit 88
Other income 21
Administrative cost -15
Other expenses -35
Operating profit 59
Finance cost -5
Finance income 6
PBT 60
Income tax expenses -19
Profit for the year 41
Other comprehensive income -revaluation gain 10
Total comprehensive income for the year 51

Working
1 Goodwill - acquisition of Nathan

Total consideration 80
FV of NCI 45
Less FV of net asset -110
+ Share capital -25
+ Retained earnings -65
+ Other components of equity -6
+ Change in FV of Land -14
Goodwill at acquisition 15
Impairment of goodwill at 30 April X3 -3
Goodwill at 30 April X3 12

!!! Goodwill at 30 April X4 17

Revaluation surplus of goodwill 5
Impairment recorded against goodwill are not allowed to be reversed
Therefore, $5 million ($17m – $12m) must be charged to profit or loss to reduce goodw

Dr. Expenses 5
Cr. Goodwill 5

2 Disposal of Nathan

1 May X2 60%
30 April X4 52%
No control was lost, therefore, no change in Consolidated PnL. Gain/loss in other incom
Proceeds received 18
Carrying amout of investment disposed 12.67
Profit 5.33

The carrying amount of investment increased from 90 to 95 mil recorded in other comp

Dr. Other comprehensive income 5

Cr. Investment in subsidiary / goodwill 5
 Nathan Options Adjustment Consolidated Note
115 70 585
-65 -36 -413
50 34 0 172
7 2 -5.3 25
-9 -12 -36
-19 -8 -62
29 16 -5 99
-6 -4 -15
5 8 19
28 20 -5 103
-9 -5 -33
19 15 -5 70
2 0 -5 7
21 15 -10 77

owed to be reversed
rged to profit or loss to reduce goodwill to the correct amount of $12 million.

From subsidiary to subsidiary (Control to control)

lidated PnL. Gain/loss in other income should be reversed
 (= Disposed %/ Total investment before disposal % * Net asset)
>> should be reversed

90 to 95 mil recorded in other comprehensive income should be reversed