The Professionals' Academy Of Commerce (PAC)

Exam Focused Topic-wise Test Schedule for CFAP

Advanced Accounting and Financial Reporting (AAFR)
All tests will be conducted online, all tests will be uploaded on LMS, scripts also
marked online. Regards Awais Ali

Sr. No. Dates / Days Topics

Basic consolidation including Associated co.

1 Mon 17 Aug, 2020
& complex structures & Step acquisition

Joint Arrangement, Separate FS, Disposal of

2 Mon 31 Aug, 2020
Subsidiary & IFRS 2 IFRS 5

IAS 12 , IAS 19 & Cash Flows (IAS 7) IAS-

3 Mon 14 Sep, 2020
33

Specialized Accounts, IFRS 15 SME`s &

4 Mon 28 Sep, 2020
Islamic AS , IAS 29 Financial Instruments

Foreign Operations , IAS 21 , Financial

5 Mon 12 Oct, 2020
Instruments

Financial Instruments IAS 40 , IAS 36, , IFRS

6 Mon 26 Oct, 2020
13, IFRS-16 , IAS 24,IAS 34

q Free of Cost for PAC students.

q Registered students can submit through the LMS portal. Only registered students will
be allowed to attempt the tests.

q Tests will be marked and returned within one week after submission.
q Test duration is 1.5 hour.
q For further query you can contact CFAP coordinator Mr. Zafar iqbal 03018410205

For Refistration:
Call us at: (042)-35878070-3, 0300-848041, 0301-8410201, 0301-8410196
Visit our website: www.pac.edu.pk
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 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP
17 August 2020
1.5 hour – 50 marks
Regards Awais Ali Test-01

Advanced Accounting & Financial Reporting

Q1.

(15)
 Advanced Accounting & Financial Reporting |Page 2 of 3
Q2.

(15)

Q3. The following draft statements of financial position relate to Delta, Soft and Cans, all public listed entities,
as at 31 March 2018.
Delta Soft Cans
Assets Rs. m Rs. m Rs. m
Non-current assets
Property, plant and equipment 1,062 1,210 1,265
 Advanced Accounting & Financial Reporting |Page 3 of 3
Investments in subsidiaries
Soft 1,140
Cans 928
Investment –Others 68
Other financial assets 190
______ ______ ______
3,388 1,210 1,265
Current assets: 885 782 224
______ ______ ______
Total assets 4,273 1,992 1,489

Equity and liabilities

Equity share capital (Rs.1 each) 1,650 720 700
Retained earnings 1,180 880 364
Other components of equity 128 78 59
______ _____ ______
Total equity 2,958 1,678 1,123
Non-current liabilities 1,143 189 172
Current liabilities 172 125 192
Total liabilities 1,315 314 366
______ ______ ______
Total equity and liabilities 4,273 1,992 1,489

The following information is relevant to the preparation of the group financial statements:
i. On 1 April 2016, Delta acquired 40% of the equity interests of Cans for cash consideration of Rs.
420 million. At this date the carrying amount and fair value of the identifiable net assets of Cans
was Rs. 1,032 million. Delta treated Cans as an associate and equity accounted for Cans up to 31
March 2017. On 1 April 2017, Delta took control of Cans, acquiring a further 45% interest for cash
of Rs. 500 million and added this amount to the carrying amount of its investment in Cans. On 1
April 2017, the retained earnings and other components of equity of Cans were Rs. 293 million and
Rs. 59 million respectively and the fair value of the identifiable net assets was Rs. 1,062 million.
The difference between the carrying amounts and the fair values was in relation to plant with a
remaining useful life of five years. The share prices of Delta and Cans were Rs. 5 and Rs. 1.60
respectively on 1 April 2017.
ii. On 1 April 2017, Delta acquired 70% of the equity interests of Soft paying cash of Rs. 1,140
million. At 1 April 2017, the retained earnings and other components of equity of Soft were Rs.
780 million and Rs. 64 million respectively. The fair value of the identifiable net assets of Soft at 1
April 2017 was Rs. 1,600 million. The excess in fair value of the identifiable net assets is due to
non-depreciable land.
iii. It is group policy to value non-controlling interests at fair value and, at the date of acquisition, this
was Rs. 485 million related to Soft and Fair value of non-controlling interests related to Cans
should be estimated using the market value of the shares.
iv. At 31st March 2018,Goodwill has been reviewed for impairment and goodwill related to Soft has
been impaired by Rs. 3 million.
v. On 1st March 2018, Cans sold goods to Delta at cost plus 30 %. The amount invoiced was 20
million. 70 % of these goods remained unsold at the year end and the invoiced amount was also
paid after year end.
vi. On 1st January 2018, Soft sold equipment to Delta for Rs 30 million. The equipment had been
purchased on 1st January 2016 for Rs.35 million. The equipment was originally assessed as having
useful life of ten years and that estimate has not changed.
Required:
Prepare the consolidated statement of financial position of the Delta Group as at 31 March 2018 in
accordance with International Financial Reporting Standards. (20)
(The End)
 AAFR Topic-wise test-2 solution
Answer-1

Regards Awais Ali

Answer-2

Regards Awais Ali

Answer-3

N-1 Group Structure Delta Group

Soft Cans CSOFP
Group 0.70 0.400 0.850 As at March 31 ,2017
NCI 0.30 - 0.150 Rs (000)
1.00 0.40 1.00 Non Current Assets
DOA/I 1-Apr-16 1-Apr-15 1-Apr-16 PPE (1062+1210+1265+36-2+0.06+10-2) 3,579.06 (M-3)
PRE PRE 780.00 293.00 Intangible Assets (20+5-3+45.30+8.7) 76.00 (M-1.5)
PRE OOE 64.00 59.00
Other finanical assets (190+68) 258.00 (M-0.5)
Current Assets (885+782+224-20-3.23) 1,867.77 (M-2)

N-2 Cost of Control - Soft Total Assets 5,780.83

Invest. 1,140.00 Share Capital 504.00
RE-Pre 616.00 Share Capital 1,650.00 (M-0.5)
Goodwill 20.00 CRE(N-5) 1,322.46 (M-5)
COOE 137.80 (M-1.5)
1,140.00 1,140.00 Group Equity 3,110.26
NCI (N-3) 695.57 (M-4)
N-2 Cost of Control - Cans Total Equity 3,805.83
Invest. 500.00 Share Capital 595.00
Invest. 448.00 NCL (1143+189+172) 1,504.00 (M-1)
RE-Pre 307.70 CL (172+125+194-20) 471.00 (M-1)
Goodwill 45.30 Current Liabilities
948.00 948.00
Total Equity & Liabilities 5,780.83 -
N-3 NCI
Share Capital 216.00
Int. asset 0.90 Goodwill 5.00 N-5 CRE
Soft-Pre 264.00 Int. asset 2.10 B/F 1,180.00
Share capital- Cans 105.00 PPE 0.06
Cans-Pre 54.30 Regards Awais Ali Investment 20.00
Goodwill 8.70
Cans -RE Post 9.87
Soft -OOE Post 4.20 Cans RE Post 55.90
C/F 695.57 Soft-RE Post 29.40 C/F 1,322.46 Soft RE Post 68.60
696.47 696.47
1,324.56 1,324.56
Soft Cans
(N- 3.1) Rs(000)
NCI Fv @ acquisition date 485.00 168.00
NCI Fv share of net assets@ acquisition date (480.00) (159.30) N-6 COOE

5.00 8.70 B/F 128.00

(N- 4) Soft -OOE Post 9.80
Soft -Pre
- B/F 844.00
COC-Soft 616.000 PPE 36.00 C/F 137.80
NCI 264.000 137.80 137.80
880.00 880.00

Cans -Pre N-7 Investment - (Cans - Associate Becomes Subsidiary)

- B/F 352.00 Investment 428.00
COC-Soft 307.700 PPE 10.00 COC-Cans 448.00
NCI 54.300 CRE 20.00
362.00 362.00

448.00 448.00
Soft -RE Post
B/F 100.00
Regards Awais Ali
PPE 2.00
CRE 68.60
NCI 29.40

100.00 100.00

Soft -OOE Post

B/F 14.00
COOE 9.80
NCI 4.20

14.00 14.00

Cans -RE Post

PPE 2.00 B/F 71.00
Inventory 3.23

CRE 55.90
NCI 9.87
71.00 71.00
 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP
31 August, 2020
1.5 hour – 50 marks
Test-02

Advanced Accounting & Financial Reporting

Q.1 Welcome Limited runs two separate divisions i.e. Sport Division and Technology Division. It is engaged in
manufacturing of cricket balls and telephone sets under the umbrella of Sport Division and Technology
Division correspondingly. During the year 2016, the Chief Financial Officer (CFO) informed the
management that due to change in paradigm of cricket in modern world and shifting of base business
towards Europe, the Sport Division is no longer profitable. In December 2016, a meeting of the Board of
Directors was held to get approval from the directors, for disposal of Sport Division. Finally, on December
15, 2016, the Board formally decided to sell the division to a large exporting multinational company at a
reasonable price within six months. At this date the Board also committed to a formal plan, detailing the
execution of the sale.
Regards Awais Ali
The CFO submitted the following data to the Board of Directors in respect of Sport Division for the year
ended December 31, 2016:
 Revenue of the Sport Division is Rs. 4,283,560 and cost of sales is Rs. 1,635,455 for the year.
 Other expenses and finance cost is 67% and 8.5% of Sport Division's revenue respectively.
 Tax expenses are Rs. 58,000.
 Other information extracted from the Statement of Financial Position include:
Rupees
Inventory 543,423
Trade & Other receivables 210,066
Property, plant & equipment 2,100,552
Bank overdraft 856,007
Other Information:
 The contract will be signed on February 28, 2017, and it was agreed by the buyer that they will take
over the division on April 15, 2017.
 In terms of the contract, equipment is deemed to be worth at Rs. 2,648,105 and all other assets and
liabilities are deemed to be worth at their carrying amounts.
 The financial year of the company ended on December 31, 2016.

Required:
In the light of IFRS - Non-Current Assets Held for Sale and Discontinued Operations
a) From which financial year, Sport Division will be classified as discontinued operation and would be
disclosed separately in the financial statements of the company. (02)
b) Prepare an appropriate disclosure with regard to Sport Division as discontinued operation in the
financial statements of Welcome Limited as at December 31, 2016. (08)

Q.2 On 1 January Year 1 Beta Limited (‘BL’) grants100 cash-settled share appreciation rights (SARs) to each
of its 500 employees on the condition that the employees remain in its employ for the next three years and
BL reaches a revenue target (Rs.1 billion in sales) by the end of Year 3. BL expects all employees to
remain in its employ.
I. At the end of Year 1, the BL expects that the revenue target will not be achieved by the end of Year 3.
II. During Year 2, BL’s revenue increased significantly and it expects that it will continue to grow.
Consequently, at the end of Year 2, BL expects that the revenue target will be achieved by the end of
Year 3.
III. At the end of Year 3, the revenue target is achieved and 150 employees exercise their SARs. Another
150 employees exercise their SARs at the end of Year 4 and the remaining 200 employees exercise
their SARs at the end of Year 5.
 Advanced Accounting & Financial Reporting |Page 2 of 3
The following table shows the estimated fair value of the SARs at the end of each year and the intrinsic
values of the SARs at the date of exercise.

Year Fair Value (one SAR) Intrinsic Value (one SAR)

1 14.40 -
2 15.50 -
3 18.20 15
4 21.40 20
5 25.00 25

Required:
Discuss accounting treatment and Journal entries for each year. (10)

Q3. The following draft statements of financial position relate to Alpha, Beta and Gamma, all public listed entities,
as at 30 September 2017.
Alpha Beta Gamma
Rs.m Rs.m Rs.m
Assets
Non-current assets
Property, plant and equipment 1,062 1,210 1,265
Investments in :
Beta 1,140
Gamma 928
Investment in Zeeta 68
Other financial assets 190
–––––– –––––– ––––––
3,388 1,210 1,265
Current assets: 885 782 224
–––––– ––––––
Total assets 4,273 1,992 1,489
–––––– ––––––
Equity and liabilities
Equity share capital (Rs.1 each) 1,650 720 700
Retained earnings 1,180 880 364
Other components of equity 128 78 59
–––––– ––––––
Total equity 2,958 1,678 1,123
–––––– ––––––
Non-current liabilities 1,143 189 172
Current liabilities 172 125 194
–––––– ––––––
Total liabilities 1,315 314 366
–––––– ––––––
Total equity and liabilities 4,273 1,992 1,489
–––––– –––––– ––––––
The following information is relevant to the preparation of the group financial statements:
I. On 1 October 2016, Alpha issued 0.5 million 10% convertible term-finance certificates (TFCs) of Rs. 100
each. The TFCs are redeemable on 30 September 2019 at par. Each TFC is convertible into one ordinary
share at the option of the certificate holder at any time prior to maturity. On the date of issue, the prevailing
market interest rate for similar debt without conversion option was 13% per annum. The Proceed of Rs. 50
million were credited to Non- Current liabilities in the financial statements
Interest payable annually on 30 September each year has been paid and accounted for as an expense in the
financial statements
II. On 1 October 2015, Alpha acquired 40% of the equity interests of Gamma for cash consideration of
Rs. 420 million. At this date the carrying amount and fair value of the identifiable net assets of Gamma was
Rs. 1,032 million. Alpha treated Gamma as an associate and equity accounted for Gamma up to 30 September
2016. On 1 October 2016, Alpha took control of Gamma, acquiring a further 45% interest for cash of Rs. 500
million and added this amount to the carrying amount of its investment in Gamma. On 1 October 2016, the
 Advanced Accounting & Financial Reporting |Page 3 of 3
retained earnings and other components of equity of Gamma were Rs. 293 million and Rs. 59 million
respectively and the fair value of the identifiable net assets was Rs. 1,062 million. The difference between the
carrying amounts and the fair values was in relation to plant with a remaining useful life of five years. The
share prices of Alpha and Gamma were Rs. 5 and Rs. 1.60 respectively on 1 October 2016.
III. On 1 October 2016, Alpha acquired 70% of the equity interests of Beta paying cash of Rs. 1,140 million. At
1 October 2016, the retained earnings and other components of equity of Beta were Rs. 780 million and Rs.
64 million respectively. The fair value of the identifiable net assets of Beta at 1 October 2016 was Rs. 1,600
million. The excess in fair value of the identifiable net assets is due to non-depreciable land.
IV. Alpha has owned a 25% equity interest in Zeeta for a number of years. Zeeta had profits for the year ended 30
September 2017 of Rs. 20 million which can be assumed to have accrued evenly. Zeeta does not have any
other comprehensive income. On 31 March 2017, Alpha sold a 10% equity interest for cash of Rs. 42 million.
Alpha was unsure of how to treat the disposal and so has deducted the proceeds from the carrying amount of
the investment at On 1 October 2016 which was Rs. 110 million (calculated using the equity accounting
method). The fair value of the remaining 15% shareholding was estimated to be Rs. 65 million at 31 March
2017 and Rs. 67 million at 30 September 2017. Alpha no longer exercises significant influence and has
designated the remaining shareholding as fair value through other comprehensive income
V. At 30 September 2017,Goodwill has been reviewed for impairment and goodwill related to Beta has been
impaired by Rs. 3 million.
VI. On 1st July 2017, Beta sold an equipment to Alpha for Rs 30 million. The equipment had been purchased
on 1st July 2015 for Rs.35 million. The equipment was originally assessed as having useful life of ten
years and that estimate has not been changed. Regards Awais Ali
VII. On 1st September 2017 , Gamma sold goods to Alpha at cost plus 30 %. The amount invoiced was 20
million. 70 % of these goods remained unsold at the year end and the invoiced amount was also paid after
year end.
VIII. It is group policy to value non-controlling interests at fair value and, at the date of acquisition, this was Rs.
485 million related to Beta and Fair value of non-controlling interests related to Gamma should be estimated
using the market value of the shares.
Required:
Prepare the consolidated statement of financial position of the Alpha Group as at 30 September 2017 in
accordance with International Financial Reporting Standards. (30)

(The End)
 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP

Solution Test-2
Advanced Accounting & Financial Reporting
Ans.1
The initial date on which information on the discontinued operation will be disclosed for the first time, is the earlier of either the
date of disposal or the date the component (disposal group) was classified as held for sale (M-1)
On December 15, 2016 the board formally decided to sell the sports division to a large sporting goods manufacturer (buyer) at a
fair price and within a reasonable time frame. The sale is therefore highly probable on the December 15, 2016 and the
discontinued operation should therefore be disclosed from that date(M-1)
Welcome Limited
Notes to the Financial Statements for the year ended December 31, 2016
Accounting Policies:
Assets held for sale
Non-current assets and disposal groups are classified as held for sale when the inflow of economic benefits inherent in those
assets are expected to be derived primarily through sale rather than use and the sale is highly probable. The assets must be
available for immediate sale subject only to terms and delays customary for sales of the type in question. (M-0.5)
Discontinued operations:
An entity presents the results of its operations as a discontinued operation when the operation represents a component of the entity
that has been classified as held for sale or disposed of. Comparatives are restated in this regard. (M-0.5)
Discontinued Operations:
Rupees
Non-current assets held for sale
Property, plant and equipment 2100552 0.5
Accounts receivable 210066 0.5
Inventory 543423 0.5
2854041
Bank overdraft (856007) 0.5
Total per statement of financial position 1998034
Analysis of loss on discontinued operation
Revenue 4283560 0.3
Cost of sales (1635455) 0.3
Gross profit 2648105 0.3
Other expenses (2869985) 0.3
Finance cost (364103) 0.3
Loss before tax (585983)
Income tax expense (58000) 0.3
Loss for the period from discontinued operations (643983) 0.5
A decision to dispose of the sport division was taken on December 15, 2016 because the division was no longer profitable. It is
 Advanced Accounting & Financial Reporting |Page 2 of 6
expected that this division will be sold for cash and that the sale will be completed by the end of June 2017. (M-1)

Ans.2
Year Fair value of one SAR Intrinsic value of one SAR
1 CU 14.40 -
2 CU15.50 -
3 CU18.20 CU15.00
4 CU 21.40 CU 20.00
5 CU 25.00 CU 25.00

Application of requirements Number of employees Best estimate of whether the revenue

Expected to satisfy the service condition Target will be met
Year 1 500 No
Year 2 500 yes
Year 3 500 yes
Year Calculation Expense CU liability CU
1 SARs are not expected to vest:
No expense is recognized - -
2 SARs are expense to vest 500
Employees *100SARs*CU15.00*2/3 516,667 516,667
3 (500-150)employees*100SARs*CU18.20*3/3
-CU516,667+150employees*100SARs*CU15.00 120,333 637,000
225,000
Total 345,333
4 (350-150)employees*100SARs*CU21.40-CU637,000 (209,000) 428,000
+150employees*100SARs*CU20.00 300,000
Total 91,000
5 (200-200)employees*100SARs *
CU25.00-CU428,000+200employees*100SARs* (428,000)
CU25.00 500,000
Total 72,000
Total 1,025,000
Year 1 (M-1)
Y2 to Y5 (M2 each Year)

Ans.3:

N-1 Group Structure Alpha Group

Beta Gamaa Zeeta CSOFP

 Advanced Accounting & Financial Reporting |Page 3 of 6

Group 0.70 0.400 0.850 0.25 0.15 As at September 30 ,2017

NCI 0.30 - 0.150 - - Rs (000)

Non Current
1.00 0.40 1.00 0.25 0.15 Assets
# of
1-Apr- Years (1062+1210+1265+36-
DOA/I 1-Oct-16 1-Oct-15 16 ago 31-Mar-17 PPE 2+0.06+10-2) 3,579.06 (M-3)
PRE
PRE 780.00 293.00 Intangible Assets (20+5-3+45.30+8.7) 76.00 (M-2)

PRE
OOE 64.00 59.00
Other finanical (190+68+42+2.5-
assets 112.5+65+2) 257.00 (M-3)
(885+782+224-20-
Current Assets 3.23) 1,867.77 (M-1.5)

N-2 Cost of Control - Beta Total Assets 5,779.83

Invest. 1,140.00 Share Capital 504.00

RE-Pre 616.00 Share Capital 1,650.00 (M-0.5)

Goodwill 20.00 CRE(N-5) 1,309.06 (M-5)

COOE 175.22 (M-2)

1,140.00 1,140.00 Group Equity 3,134.28

NCI (N-3) 695.57 (M-4)

N-2 Cost of Control - Gamaa Total Equity 3,829.85

Invest. 500.00 Share Capital 595.00

(1143+189+172-
Invest. 448.00 NCL 35.42+10.40) 1,478.98 (M-2.5)
 Advanced Accounting & Financial Reporting |Page 4 of 6

RE-Pre 307.70 CL (172+125+194-20) 471.00 (M-1.5)

Current
Goodwill 45.30 Liabilities

948.00 948.00

Total Equity & Liabilities 5,779.83 -

N-3 NCI

Share Capital 216.00

Int. asset 0.90 Goodwill 5.00 N-5 CRE

Beta-Pre 264.00 Int. asset 2.10 B/F 1,180.00

Share capital- Loss on disposal of
Gamma 105.00 investment 5.50 PPE 0.06

Gamma-Pre 54.30 NCL 10.40 Investment 20.00

Goodwill 8.70 Associate share 2.50

Gamma -RE
Post 9.87

Beta -OOE Post 4.20 Gamma RE Post 55.90

C/F 695.57 Beta-RE Post 29.40 C/F 1,309.06 Beta RE Post 68.60

696.47 696.47

1,327.06 1,327.06

Beta Gamma
(N- 3.1) Rs(000)

NCI Fv @ acquisition date 485.00 168.00

NCI Fv share of net assets@
acquisition date (480.00) (159.30) N-6 COOE
 Advanced Accounting & Financial Reporting |Page 5 of 6

5.00 8.70 B/F 128.00

(N- 4) Beta -OOE Post 9.80

Beta -Pre Other financial assets 2.00

- B/F 844.00 NCL 35.42

COC-
Beta 616.000 PPE 36.00 C/F 175.22

NCI 264.000 175.22 175.22

880.00 880.00

Gamma - Investment - (Gamma - Associate Becomes

Pre N-7 Subsidiary)

- B/F 352.00 Investment 428.00

COC-
Beta 307.700 PPE 10.00 COC-Gamma 448.00

NCI 54.300 CRE 20.00

362.00 362.00

448.00 448.00
Beta -RE
Post

B/F 100.00 N-8 Disposal

Investment 112.50 Investment 42.00

PPE 2.00 Other financial asset 65.00

 Advanced Accounting & Financial Reporting |Page 6 of 6

CRE 68.60 CRE 5.50

NCI 29.40

100.00 100.00 112.50 112.50

Beta-OOE Post
Interest @ Effective Closing
B/F 14.00 Opening Balance Payment Rate13% Balance

COOE 9.80 464.58 (50) 60.3954 474.9754

NCI 4.20 474.9754 (50) 61.746802 486.722202

486.722202 (50) 63.27388626 499.996088

14.00 14.00

Gamma -RE Post

PPE 2.00 B/F 71.00

Inventory 3.23

CRE 55.90

NCI 9.87
71.00 71.00
 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP
14 September, 2020
1.5 hour – 50marks
Test-03
Advanced Accounting & Financial Reporting
Q.1 The following is the detail of an employee gratuity plan of Kaptaan Limited (“KL”) for the year ended December
31, 2016.
2016 2015
Rs. (m) Rs. (m)
Current service cost 32 25
Benefit paid 10 18
Contribution in plan assets 65 50
Fair value of plan assets-closing balance 590 556
Present value of defined benefit obligation-closing balance 572 525
% %
Discount rate 8.55 7.92
The following information is also relevant.
a) All changes during the year are assumed to be at the yearend unless provided otherwise .
b) Assume that there is no minimum funding requirements.
c) The fair value plan assets and present value of defined benefit liability was Rs. 530 million before
asset ceiling and Rs. 510 million respectively on December 31, 2014.
d) The refund available from employee benefit plan was Rs. 10, 15 and 18 million on December 31, 2014,
2015 and 2016 respectively.
e) During the year ended December 31, 2016 the plan was amended which have resulted in increase in
present value of employee benefits amounting to Rs. 12 million. The increase in benefits may be taken
in present value calculation from June 30, 2016.
Required:
Prepare relevant extract of statement of comprehensive income and statement of financial position? (09)

Q.2 The relevant extract of statements of comprehensive income/statement of changes in equity of Azhar Limited
(“AL”) and its 80% owned subsidiary Bahadur Limited (“BL”) are as under: -
For the year ended December 31, 2015 Azhar Limited Bahadur Limited
Rs. Rs.
Profit after tax 4,535,000 2,050,000
Ordinary dividend declared/ paid 1,000,000 500,000
Paid up capital (Rs. 10 per share) 2,000,000 1,500,000
The following information is also relevant:
a) During the year the BL sold goods to AL for Rs. 500,000 on which it has charged a markup of 25%, 20% of
the goods remained un-sold at the year end.
b) There has been a fair value gain on property, plant and equipment at the date of acquisition of BL Rs.
400,000 which results in extra depreciation of Rs. 50,000 per year. The applicable tax rate in BL jurisdiction
is 32%.
c) AL granted options over 100,000 ordinary shares in 2014. The options can be exercised between 2015 and
2016 at Rs. 60 per share. The average market price of Azhar Limited shares during the year was Rs. 75.
d) AL has also entered into a contingent share agreement to issue 200,000 shares to Its Vice President (VP) if
the earnings of the company have increased by Rs. 1,500,000. In addition to this VP will also get 10,000
shares on opening of every new branch. During the year new branches were opened on April 01, July 31,
and November 30.
 Advanced Accounting & Financial Reporting |Page 2 of 4
e) In addition AL has 9%, 800,000 Rs. 10 each convertible cumulative preference shares and Rs. 1,000,000
(Rs. 10 each), 5% convertible bonds in issue throughout 2015. Each convertible bond and preference share
is convertible into two ordinary shares.
Required:
Calculate consolidated basic and diluted earnings per share for Azhar Limited Group? (12)

Q.3 The following are the information related to Chatha Limited (“CL”) for the year ended December 31,2017
Balances / Amounts as appearing in separate financial statements of CL as on December 31,2017.
Rs. (“000”)
Investment in BL-at cost 220,000
Current Tax expense 40,200
Deferred Tax Liability 12,160
Further Information related to CL (Rs.in “000”)
 On December 31,2017, PPE of CL were revalued for the first time which resulted in revaluation gain of
Rs.44,000
 Balance of Deferred tax liability in books of CL as on December 31,2016 was Rs.12,160 and rate of tax for the
year 2017 was 30%
 Tax Rate for the year 2018 is 32% and that has already been enacted before the current year end.
Further Information related to acquisition of Basra Limited (“BL”) (Rs.in “000”)
i. On December 31,2017 CL acquired 100 % shares of Basra Limited (“BL”) for Rs.220,000.The
following are balances of assets and liabilities along with Fair Values and Tax bases of BL as of
acquisition date
Assets/(Liabilities) Fair Value Carrying Value Tax Base
Property, plant and equipment 145,000 130,000 120,000
Trade receivables 34,500 34,500 36,000
Inventories 50,000 50,000 52,000
Cash and cash equivalents 10,000 10,000 10,000
(Health care benefits payables) (18,000) (18,000) -
(ii) At the date of acquisition of BL , there was on deferred tax recognized in the books of BL.
(iii) Goodwill arising on acquisition is not allowable for taxation
(iv) Tax Rate for the year 2018 is 32% (applicable to BL) and that has already been enacted before the
current year end.
Required:
Determine the following amounts with respect to Consolidated financial statements of CL Group for the year
ended December 31,2017.
 Goodwill
 Deferred Tax (Asset)/Liability
 Deferred Tax expense / (income) to be presented in statement of comprehensive income (09)

Q.4
With headquarter in the heart of industrial zone of Lahore, Al-Sahara Limited provides superior quality textiles to
a wide range of customers around the globe in addition to catering the local market. Al-Sahara Limited, being
fresh to the export market, brings an innovative approach to the world of textiles, with providing all solutions
within a single system and acting as a liaison between the end user and cotton grower. The history of AI-Sahara
Limited began in the year 2000 when it started its operations. Moving gradually and making the basis strong, the
company finally decided to enter into the international arena. Al-Sahara Limited is involved in every stage from
cotton selection to final packed goods. With a strong support from manufacturing base and state of the art weaving
setup in the total supply chain, Al-Sahara Limited is capable of producing `jacquards' in T-180s to T-600. The
company is producing 'dobby's' upto 1,400 thread count. It has a capability of doing both prints and solids. Unlike
others, Al-Sahara Limited possesses operational experience in all areas of fabric production and packaging through
competent individuals and strong manufacturing base due to which the company is growing at a very rapid pace. In
order to meet the individual needs of the clients, the company possesses excellence in different qualities, which
include `sateens', 'percales', `dobby's', `jacquards' and `yarn dyeds' in both prints and solids. The company has a
 Advanced Accounting & Financial Reporting |Page 3 of 4
number of subsidiaries, one of which, Al-Dawra Private Limited was acquired during the year ended March
31, 2018. The draft consolidated financial statements of Al-Sahara Limited for the year ended March 31, 2018 are
as follows:
AI-Sahara Limited
Consolidated Statement of Comprehensive Income
for the year ended March 31, 2018
Rupees
Operating profit 2,835,000
Loss on disposal of property, plant and equipment (PPE) (127,500)
Finance cost (315,000)
2,392,500
Share of profits of associates 165,000
Profit on ordinary activities before taxation 2,557,500
Taxation (615,000)
Profit after tax 1,942,500
Profit attributable to:
Owners of Al-Sahara Limited 1,477,500
Non-controlling interest (NCI) 465,000
Group profit 1,942,500
Al-Sahara Limited
Statements of Financial Position
as at March 31,
Rs. '000'
Al-Sahara Limited Al-Dawra
(Consolidated) Private Limited
Assets 2018 2017 [At Acquisition]
Non-current assets
Property, plant and equipment (PPE) 3,660,000 2,100,000 690,000
Intangibles 690,000 630,000 -
Investment in associates 570,000 495,000 -
Total non-current assets 4,920,000 3,225,000 690,000
Current assets
Inventories 1,027,500 900,000 270,000
Trade and other receivables 465,000 390,000 127,500
Cash and cash equivalents - 90,000 22,500
Total current assets 1,492,500 1,380,000 420,000
Total assets 6,412,500 4,605,000 1,110,000
Equity and Liabilities
Equity
Ordinary shares (Rs. 10 each) 675,000 600,000 525,000
Share premium 375,000 150,000 120,000
Retained earnings 2,392,500 1,215,000 315,000
Non-controlling interest (NCI) 375,000 315,000 -
Total equity 3,817,500 2,280,000 960,000
Liabilities
Non-current liabilities
Long-term loans 1,650,000 1,650,000 -
 Advanced Accounting & Financial Reporting |Page 4 of 4
Current liabilities
Bank overdraft 120,000 - -
Trade payables 315,000 285,000 120,000
Taxation 510,000 390,000 30,000
Total current liabilities 945,000 675,000 150,000
Total liabilities 2,595,000 2,325,000 150,000
Total equity and liabilities 6,412,500 4,605,000 1,110,000
Additional Information:
i. Al-Sahara Limited acquired 80% of the ordinary shares of Al-Dawra Private Limited on July 01, 2017 for Rs.
600 million in cash and issued 2.5 million Rs. 10 ordinary shares with a market value of Rs. 150 million. At
the date of acquisition, Al-Dawra Private Limited's assets and liabilities were recorded at their fair value, with
the exception of some plant, which had a fair value of Rs. 150,000 below its carrying value.
ii. During the year, Al-Sahara Limited made a further issue of ordinary shares, again, at a premium above
nominal value.
iii. The PPE sold during the year, had a carrying value of Rs. 210 million. Total depreciation charges for the year
were Rs. 313.5 million.
Required:
Prepare a Consolidated Statement of Cash Flows in accordance with the International Accounting Standards for
the year ended March 31, 2018. (20)
(The End)
 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP
28 September , 2020
1.5 hour – 50 marks
Test-04

Advanced Accounting & Financial Reporting

Q.1 Alpha Limited is engaged in a business of supplying electrical appliances. The Director Finance appraised the
management about the hyperinflation rate of economy which has been continuously rising and exceeded
100% over a period of five years. The movement in consumer price index (CPI) of the economy as at
December 31 of each of the following years is as follows.

Year 2012 2013 2014 2015 2016

CPI 100 120 140 230 290
The Director Finance provided the following statement of financial position of the company as at December
31, 2016 before adjustment of hyperinflation and advised the company to implement the relevant IAS and
restate the company's statement of financial position:
Statement of Financial Position
as at December 31, 2016
Assets Equity & Liabilities
Non-Current Assets Equity
Property, Plant & Equipment 1,035 Share Capital (Rs. 10 per Share) 460
Current Assets Retained Earnings 2,703
Inventories 2,055 Total Equity 3,163
Trade Receivables 1,050 Laibilities
Cash 403 Non-Current Liabilities
Total Current Assets 3,508 Long-term loan 575
Current Liabilites
Trade payables 505
Bank Overdraft 300
Total Current Liabilities 805
Total Liabilities 1,380
Total Assets 4,542.50 Total Equity & Liabilities 4,542.50
Additional Information:
i. The property, Plant & equipment were purchased on December 31, 2014.
ii. The inventories are maintained for six month.
iii. The bank over draft and long-term loan were raised on February 15, 2016 and March 31, 2016
respectively.
Required:
i. Prepare the statement of financial position of Alpha Limited as at December 31, 2016 after adjusting
hyperinflation. (07)
ii. The management of the company is concerned as to how the values will be presented in the financial
statement, if the economy is no longer hyperinflationary. Discuss. (02)

Q.2 Al-Saba Investments Management Company (the Management Company) has launched an open-end equity
fund Al-Saba Mutual Fund (ASMF), investing in shariah compliant listed equity securities.
Following data is related to ASMFfor the year ended June 30,2016:
Rs. 000
Debit Credit
Investments 53,896
Receivable on conversion of units 924
 Advanced Accounting & Financial Reporting |Page 2 of 3
Receiavable against sale of investments – net 538
Dividend receivable 135
Deposits, Prepayments and other receivables 53
Balances with Banks 2,873
Payable to Al-Safa Investment management company 412
Payable to Central Depository Company (CDC) 5
Payable to Parent Company 2
Payable to Securities & Exchange
Commission of Pakistan (SECP) 42
Payable on redemption and conversion of units 2,800
Accrues expense and other liabilities 405
Dividend Income 1,973
Profit on saving account with banks 217
Net realised gain / loss on sale of investments 22
Other income 72
Impairment loss on 'available for sale' investments 128
Remuneration to the management company 870
Provincial sales tax and federal excise duty 296
Remuneration to CDC 46
Fees and Subscription 42
Auditors' remuneration 1
Miscellaneous expenses 32
Brokerage expenses 69
Bank and settlement charges 20
Provision for Workers' Welfare Fund (WWF) 158
Printing Expenses 1
Element of income and capital gains included in prices 1,469
of units issued, less those in units redeemed – net
Un realised appreciation on re-measurement of
investment
At fair value through profit or loss–net 5,657
Classified as available for sale–net 1,531
Required:
i. Prepare Income Statement and Statement of Comprehensive Income for the year ended
June30,2016. (06)
ii. Prepare Statement of Assets and Liabilities as on June 30,2016. (06)

Q.3 Ball PC, computer manufacturer, enters into contract with Forward University to deliver 300 computers for
total price of Rs. 600 000 (Rs.2 000 per computer).
Due to necessary preparation works, Forward University agrees to deliver computers in 3 separate
deliveries during the forthcoming 3 months (100 computers in each delivery). Forward University takes
control over the computers at delivery.
After the first delivery is made, Forward University and Ball PC amend the contract. Ball PC will supply
200 additional computers (500 in total).
How should Ball PC account for the revenue (under IFRS 15) from this contract for the year ended
31 December 20X1 if:
Scenario 1:
The price for additional 200 computers was agreed at Rs. 388 000, being Rs. 1 940 per computer. Ball PC
provided a volume discount of 3% for additional delivery which reflects the normal volume discounts
provided in similar contracts with other customers.
Scenario 2:
The price for additional 200 computers was agreed at Rs. 280 000, being Rs. 1 400 per computer. Ball PC
provided a discount of 30% for additional delivery because it hopes for the future cooperation with
 Advanced Accounting & Financial Reporting |Page 3 of 3
Forward University (nothing even discussed yet).
As of 31 December 20X1, Ball PC delivered 400 computers (300 as agreed initially and 100 under the
contract amendment). (15)
Q.4 While finalizing the financial statements of the year ended June 30, 2016, the finance manager came across
the following transactions.
a) The entity is having outstanding loan of Rs. 25 million @ effective / applicable rate of 12.5% has
applied to the bank for restructuring of loan. The bank and the entity agreed on the following terms.
I) The loan outstanding period extended to 10 years from current 7 years.
II) The rate of interest reduced to 10.5% from current 12.5%.
III) The interest due for the year has been waived in full amount.
IV) Considering the current credit rating of the company the market rate of interest will be
15.5%.
Discuss the accounting treatment and pass necessary journal entries at the year ended June 30, 2016?
(07)
b) On 01 July2015, an entity reclassifies a Rs. 9 million bond from fair value through OCI to at
Amortized Cost. On the date of the reclassification, the bond’s amortized cost is Rs. 9,198,571 and
the original effective interest rate is 8.75%. The bond’s fair value is Rs. 9,488,165. The coupon rate
on bond is 10% pa. The new effective rate at the date of reclassification is 7% pa. The bond’s
remaining term is two years.
The fair value of the bond on June 30, 2016 Rs. 9,500,200.
Required:
Pass necessary double entries on date of re-classification and on the end of the year? (07)

(The End)
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)
Alpha Limited
Statement of Financial Position
as at December 31, 2016
Rs. ‘000’
Assets Equity and Liabilities

Non-Current Assets Equity

Property, plant and equipment Share capital (Rs. 10 per share)
(1,035 x 290 ÷ 140) 2,144 (460 x 290 ÷ 100) 1,334
Current Assets Retained earnings 3,174
Inventories Total equity 4,508
{2,055 x 290 ÷ (230 + 290 ÷2)} 2,292 Liabilities
Trade receivables 1,050 Non-Current Liabilities
Cash 402 Long-term loan 575
Total current assets 3,744 Current Liabilities
Trade payables 505
Bank overdraft 300
Total current liabilities 805
Total liabilities 1,380
Total assets 5,888 Total equity and liabilities 5,888
(M-1) Each
(ii) Ceasing to be Hyperinflationary:
Likewise, judgement will be required in determining whether an economy is no longer
hyperinflationary. The criteria used for this is whether the cumulative inflation rate drops below100%
in a three-year period.

When the economy ceases to have hyperinflation, then the entity should discontinue preparing
financial statements in accordance with IAS 29 –Financial Reporting in Hyperinflationary Economies. If
possible, all entities in that environment should cease to apply the standard from the same date.

The carrying amounts in subsequent financial statements will be taken as the amount expressed in
the measuring unit current at the end of the previous year.
(M-2)

Page 1 of 6
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)
Al-Saba Mutual Fund
Income Statement and Statement of Comprehensive Income
for the year ended June 30, 2016

Rs. 000
2016
Income
Dividend income 1,973 (M-0.5)
Profit on saving account with banks 217 (M-0.5)
Net realized gain/ loss on sales of investment (22) (M-0.25)
Other income 72 (M-0.25)
2,240
Unrealized appreciation on re-measurement of
investment at fair value through profit or loss (net) 5,657 (M-0.5)
Impairment loss on available for sale investment (128) (M-0.5)
5,529
Total income 7,769

Expenses
Remuneration to the management company 870 (M-0.25)
Provincial sales tax and FED 296 (M-0.25)
Remuneration to Central Depositary Company (CDC) 46 (M-0.25)
Annual fees SECP 42 (M-0.25)
Auditor's remuneration 1 (M-0.25)
Misc expenses 32 (M-0.25)
Brokerage 69 (M-0.25)
Bank and settlement charges 20 (M-0.25)
Provision for workers' welfare fund 158 (M-0.25)
Printing expenses 1 (M-0.25)
Total expenses 1,535
Net income from operating activities 6,234
Element of income and capital gains included in prices'
of units issued less those in units redeemed - net 1,469 (M-0.25)
Net income for the year before taxation 7,703
Taxation -
Net income for the year after taxation 7,703
Other comprehensive income for the year
Items that can be reclassified to income statements in
subsequent periods:
Unrealized appreciation on re-measurement of
Investments classified as available for sales –net 1,531 (M-1)
Total comprehensive income for the year 9,234

Al-Saba Mutual Fund

Statement of Assets and Liabilities
as on June 30, 2016
Rs. 000
2016
Assets
Balances with banks 2,873 (M-1)
Investments 53,896 (M-1)
Receivable on conversion of units 924 (M-1)

Page 2 of 6
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)
Receivable against sales of investments 538 (M-1)
Dividend receivable 135 (M-0.5)
Deposits, prepayments and other receivable 53 (M-0.5)
Total assets 58,419

Liabilities
Payable to Al-Saba Investment Management Company 412 (M-1)
Payable to CDC 5 (M-1)
Payable to parent company 2 (M-0.5)
Payable to SECP 42 (M-0.5)
Payable on redemption and conversion of units 2,800 (M-0.5)
Accrued expense and other liabilities 405 (M-0.5)
Total liabilities 3,666

Net assets 54,753

Page 3 of 6
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)
Revenue under IFRS 15
Here, the additional contract represents typical contract modification , as the amount of
IFRS 15 precisely specifies how to account for contract modifications , based on the terms of

1. Contract modification is a separate contract

Contract modification is accounted for as for a separate contract (meaning that the original contract is

i Additional goods and services in the modification must be distinct from the goods or

ii Amount of consideration expected for the additional goods/services must reflect the
2. Contract modification is not a separate contract
If the above criteria are not fulfilled (or one of them is not met), then the contract modification is not

Let’s take a look at our situation. Here, as we concluded that additional goods are distinct, the main

Scenario 1: 3% discount agreed on additional delivery

The price for additional computers indeed reflects their stand-alone selling prices , because Ball
Therefore, this contract modification is accounted for as a separate contract and revenue for the
year 20X1 (400 computers delivered) is:
Rs. 600 000 from the original contract for 300 computers;
Rs. 194 000 from the contract modification for additional 100 computers delivered.
Total revenue in the year 20X1 is therefore Rs. 794 000 – exactly as under IAS 18. (M-1)

Scenario 2: 30% discount agreed on additional delivery

Here, it’s clear that the price for additional computers does not reflect their stand-alone selling
prices , because 30% discount is exceptional and tied to the overall contract with the Forward
University.
It means that the second criterion is not met.
As a result, the contract modification is NOT a separate contract, but it is bundled with the
original contract. How?

In this case, as additional goods are distinct, you need to account as you would terminate the
original contract and start the new one . Still unclear?

You simply recognize the revenue from the delivery already made before contract modification under
the original contract.
For the remaining goods from the original contract and additional goods, you recognize total revenue
amounting to:
That part of consideration in the original contract that hasn’t been recognized as revenue yet (in other
words, price for goods yet to be delivered); PLUS
The consideration agreed in the contract modification.

You need to allocate this amount to individual performance obligations, or individual computers in this
case.
In the scenario 2, contract modification was made after the first delivery , so Ball PC needs to
recognize revenue for the first 100 computers in line with the original contract:

Page 4 of 6
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)

100 computers x Rs. 2 000 per computer = Rs. 200 000

Total transaction price to allocate after the contract modification is:
Rs. 400 000, being the part of original consideration related to undelivered 200 computers (300 per
contract less 100 delivered; times 2 000 per unit); (M-1)
Rs. 280 000, being total consideration for additional 200 computers;(M-1)
Total: Rs. 680 000 (M-1)
We need to allocate Rs. 680 000 to 400 computers in total (200 undelivered before contract
modification + 200 additional computers), which means that Ball PC allocates Rs. 1 700 to one
computer (680 000/400).
So what’s the total revenue recognized in 20X1 during which 400 computers were delivered? Let’s calRs.late:

Revenue for 100 computers delivered before contract modification: Rs. 200 000 (Rs. 2 000/computer)

Revenue for 300 computers delivered after contract modification: Rs. 510 000 (Rs. 1 700/computer);
Total: Rs. 710 000.(M-1)
Here you can clearly see that in this second scenario (additional delivery with 30% discount):

Under IAS 18, revenue for the year 20X1 is Rs. 740 000.
The revenue to be recognized in the next period is remaining 100 computers at Rs. 1 400 = 140 000;
that gives us total Rs. 880 000 per contract.

Under IFRS 15, revenue for the year 20X1 is Rs. 710 000.(M-1)
The revenue to be recognized in the next period is remaining 100 computers at Rs. 1 700 = 170 000;
that gives us total Rs. 880 000 per contract. (M-1)

Hmm, but the totals are the same!

Yes, sure. But the timing of revenue is different . And exactly this timing can impact your
taxes, dividends, financial rations and everything. Just think it out carefully! (M-1)

Page 5 of 6
 Advanced Accounting Financial Reporting
(Test-4 Suggested Answer)
(A)
Carrying value of loan
Principal outstanding 25,000
Interest outstanding 3,125
28,125
Revised cash flows @ original effective rate
Cash flow (5.536 x 2,625) 14,532
Principal (25,000 x 0.307) 7,698
22,230
Difference 5,895
% [5,895/28,125 x 100] 21%

New liability to be recognized

Cash flow (4.92 x 2,625) 12,927
Principal (25,000 x 0.2367) 5,917
18,844
Journal entry
Old liability 28,125
New liability 18,844
Profit or loss 9,281
(M-1 Each)

(B)
From at FVTOCI to Amortized cost

The Double entries required will be as under:-

01-07-2015
At A. cost asset 9,488,165
At FVTOC 9,488,165
Fair value gain (SOCE) 289,594
At A. Cost asset 289,594
30-06-2016
Bank 900,000
Interest income 804,875
At A. cost 95,125

Interst
Date Opeining balance Receipt Balance
income
01-07-15 9,198,571 804,875 (900,000) 9,103,446
30-06-16 9,103,446 796,554 (900,000) 9,000,000

Page 6 of 6
 The Professionals’ Academy of Commerce
Exam Focused Topic-wise Test for CFAP
12 October 2020
1.5 hour – 50 marks
Test-5
Advanced Accounting & Financial Reporting
Q.1 On 1 January 2016, Bachat Bank (“BB”) provided a loan to Aqama Limited (“AL”), amounting to Rs. 280
million. Maturity date is 31 December 2022. Annual Installment is Rs.50 million which will be paid at the
end of each year. Effective rate is 5.9114 % p.a.
Installment for the year ending December 2018 was paid on time but BB concluded that the credit risk of
the loan has increased significantly since the initial recognition. As on December 31,2018, Based on
discussions with bank's lawyers and detailed assessment of AL's situation, BB expected the following;
(i) Probability of default occurring within 12 months after the reporting date is 15 % and in this case,
BB could recover only Rs. 26 million from the bankruptcy proceedings (estimated timing: 31
December 2020)
(ii) Probability of default occurring between 1-2 years after the reporting date is 20% and in this case,
BB could recover installment for the year ending December 2019 and Rs. 19.7 million from the
bankruptcy proceedings (estimated timing: 31 December 2022)
(iii) Probability of default occurring between 2-3 years is 10 % and BB would only be able to recover
installment for the year ending December 2019 & 2020 and Rs. 21 million from the bankruptcy
proceedings (estimated timing: 31 December 2022)
(iv) Probability of default occurring between 3-4 years is 15 % and BB would only be able to recover
installment for the year ending December 2019, 2020 & 2021
(v) There are 40 % chances that no default will occur
Loan is classified at amortised cost and installment for the year ending December 2016 and December 2017
was paid on time by the AL. The balance of loss allowance as on December 31 2017 was Rs. 2,496,100.

Required:
Determine Loss allowance for the year ended December 31, 2018 and value of Loan to be reported in
statement of financial position of BB as on December 31, 2018. (12)

Q.2 Alpha is a Pakistan based company (with the rupee as its functional currency) has a financial year ending
on 31 December. On 1st July 2018 the company contracted to purchase plant from a US Company.
The following exchange rates are available:
Dates Exchange Rates
1-Jul-18 US$ 1 = Rs. 103
30-Sep-18 US$ 1 = Rs. 103.5
31-Dec-18 US$ 1 = Rs. 104
31-Jan-19 US$ 1 = Rs. 104.5
The following Payment were made as follows:
Payment Dates $
At signing the contract 1-Jul-18 60,000
At the time of shipment 30-Sep-18 150,000
Final Payment (After installation and test run) 31-Jan-19 90,000
 Advanced Accounting & Financial Reporting |Page 2 of 3

Risks and reward related to ownership of Plant was transferred to alpha at the time of shipment.
Required
Prepare double entries at relevant dates. (10)

Q.3 Rose, a public limited company, operates in the mining sector. The draft statements of financial position are
as follows, at 30 April 20X8.
Rose Petal Stem
Rs. m Rs. m Dinars m
Assets
Non-current assets:
Property, plant and equipment 370 110 380
Investment in subsidiaries
Petal 113 – –
Stem 46 – –
Financial assets 15 7 50
544 117 430
Current assets 118 100 330
Total assets 662 217 760
Equity and liabilities
Share capital 158 38 200
Retained earnings 256 56 300
Other components of equity 7 4 –
Total equity 421 98 500
Non-current liabilities 56 42 160
Current liabilities 185 77 100
Total liabilities 241 119 260
Total equity and liabilities 662 217 760
The following information is relevant to the preparation of the group financial statements.
(a) On 1 May 20X7, Rose acquired 70% of the equity interests of Petal, a public limited company. The
purchase consideration comprised cash of Rs. 94 million. The fair value of the identifiable net assets
recognised by Petal was Rs. 120 million excluding the patent below. The identifiable net assets of
Petal at 1 May 20X7 included a patent which had a fair value of Rs. 4 million. This had not been
recognised in the financial statements of Petal. The patent had a remaining term of four years to run at
that date and is not renewable. The retained earnings of Petal were Rs. 49 million and other
components of equity were Rs. 3 million at the date of acquisition. The remaining excess of the fair
value of the net assets is due to an increase in the value of land.
Rose wishes to use the 'full goodwill' method. The fair value of the non-controlling interest in Petal was
Rs. 46 million on 1 May 20X7. There have been no issues of ordinary shares since acquisition and
goodwill on acquisition is not impaired.
Rose acquired a further 10% interest from the non-controlling interest in Petal on 30 April 20X8 for a
cash consideration of Rs. 19 million.
(b) Rose acquired 52% of the ordinary shares of Stem on 1 May 20X7 when Stem's retained earnings were
220 million dinars. The fair value of the identifiable net assets of Stem on 1 May 20X7 was 495 million
dinars. The excess of the fair value over the net assets of Stem is due to an increase in the value of land.
The fair value of the non-controlling interest in Stem at 1 May 20X7 was 250 million dinars.
Stem is located in a foreign country and operates a mine. The income of Stem is denominated and
settled in dinars. The output of the mine is routinely traded in dinars and its price is determined initially
by local supply and demand. Stem pays 40% of its costs and expenses in Rupees with the remainder
being incurred locally and settled in dinars. Stem's management has a considerable degree of authority
and autonomy in carrying out the operations of Stem and is not dependent upon group companies for
 Advanced Accounting & Financial Reporting |Page 3 of 3
finance.
Rose wishes to use the 'full goodwill' method to consolidate the financial statements of Stem. There
have been no issues of ordinary shares and no impairment of goodwill since acquisition.
The following exchange rates are relevant to the preparation of the group financial statements.
Dinars to Rs.
1 May 20X7 6
30 April 20X8 5
Average for year to 30 April 20X8 5.8
(c) Rose has a property located in the same country as Stem. The property was acquired on 1 May 20X7
and is carried at a cost of 30 million dinars. The property is depreciated over 20 years on the straight-
line method. At 30 April 20X8, the property was revalued to 35 million dinars. Depreciation has been
charged for the year but the revaluation has not been taken into account in the preparation of the
financial statements as at 30 April 20X8.
(d) Rose commenced a long-term bonus scheme for employees at 1 May 20X7. Under the scheme
employees receive a cumulative bonus on the completion of five years service. The bonus is 2% of the
total of the annual salary of the employees. The total salary of employees for the year to 30 April 20X8
was Rs. 40 million and a discount rate of 8% is assumed. Additionally at 30 April 20X8, it is assumed
that all employees will receive the bonus and that salaries will rise by 5% per year.
(e) Rose purchased plant for Rs. 20 million on 1 May 20X4 with an estimated useful life of six years. Its
estimated residual value at that date was Rs. 1.4 million. At 1 May 20X7, the estimated residual value
changed to Rs. 2.6 million. The change in the residual value has not been taken into account when
preparing the financial statements as at 30 April 20X8.

Required:
Prepare a consolidated statement of financial position of the Rose Group at 30 April 20X8 in accordance
with International Financial Reporting Standards (IFRS). (20)

Q.4 Alpha is a Pakistan based company (with the rupee as its functional currency) has a financial year ending
on 31 December. It has a subsidiary in USA that it owned @ 80 %. Acquisition date is January 1,2018 and
cost of acquisition was 15,000$.

Subsidiary has following net assets as on 1st January 2018

Share Capital 5,000 $
Retained Earnings 11,000 $
There were no fair value adjustments at the date of acquisition. NCI is measured @ Fair value with Fair
Value of $ 4,500 @ 1st January 2018.
On December 31, 2018 Goodwill is impaired by 10%
The following exchange rates are available:
1 January 2018 Rs.75/$
31 December 2018 Rs.85/$

Required:
Determine Value of goodwill to be reported in CSOFP as at December 31, 2018 separating exchange
gain/(Loss) relating to goodwill. (08)

(The End)