Required: Prepare a consolidated Statement of Comprehensive Income for Ausra for the year to 31 December 2015.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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On 1 July 2015, Ausra purchased 75% of Danute by way of a share exchange of two new shares in Ausra for every three purchased in Danute plus an immediate cash payment of $11,160,000. Ausra’s share price at the acquisition date was $4.70. Only the cash element of the consideration has been recorded. On the same date, Ausra purchased $5,000,000 of Danute’s 10% loan notes at par. The summarised financial statements of both companies are as follows:

 Statement of Comprehensive Income for the year ended 31 December 2015

 

Ausra

Danute

 

$ 000

$ 000

Revenue

120,000

48,000

Cost of sales

(84,000)

(40,000)

Gross profit

36,000

8,000

Operating expenses

(11,900)

(400)

Profit from operations

24,100

7,600

Other income

300

-

Finance costs

-

(1,200)

Profit before tax

24,400

6,400

Income tax expense

(6,000)

(1,200)

Profit for the year

18,400

5,200

 

 

 

 Statements of Financial Position at 31 December 2015

 

Ausra

Danute

 

$ 000

$ 000

Non-current assets:

 

 

Property, plant and equipment

38,640

16,000

Investments

16,280

-

 

54,920

16,000

Current assets

 

 

Inventory

11,240

6,450

Receivables

13,600

7,355

Bank

5,160

2,195

 

30,000

16,000

Total Assets

84,920

32,000

Equity and liabilities

 

 

Ordinary shares of $1 each

40,000

4,000

Retained earnings

17,720

8,800

Revaluation reserve

7,200

-

 

64,920

12,800

Non-current liabilities

 

 

10% loan notes

-

10,000

Current Liabilities

20,000

9,200

 

 

 

Total Equity and Liabilities

84,920

32,000

 The following information is relevant:

1)The fair value of Danute’s net assets differed from its carrying values at 1 July 2015. Plant was $8 million in excess of its net book value. Plant had 4 years remaining at the date of acquisition. The group depreciation policy is to charge depreciation on a proportionate basis and should be included in cost of sales. No adjustment was made for this in Danute’s financial statements.

2)Ausrahas a policy of revaluing land and buildings to fair value (as allowed per IAS 16) at each reporting date. Danute accounts for its non-current assets at historical cost. At the acquisition date, Danute’s land and buildings had a fair value of $2 million greater than their book value and at 31 December 2015 this had increased by a further $400,000 (ignore any additional depreciation).

3)On 1 July 2015, Ausratransferred an item of machinery to Danute. The machine had originally cost $1.2 million on 1 July 2010, and it was transferred to Danute for $1 million. Machines have a useful life of ten years. The Useful Economic Life has not changed as a result of the transfer.

 4)During the year Ausrasold goods to Danute at a transfer price of $250,000. All of the goods were sold on outside the group by the year-end. The current accounts of Ausra and Danute were reconciled at the year end with Danute owing $50,000.

 5)Ausra’s policy is to value the non-controlling interest at fair value at the date of acquisition. The fair value of the non-controlling interests at the date of acquisition is $7.3 million.

 6)An impairment test carried out on 31 December 2015 concluded that consolidated goodwill was impaired by $780,000.

 

Required:

Prepare a consolidated Statement of Comprehensive Income for Ausra for the year to 31 December 2015.

 

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