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What are the elements of control identified by IFRS 10? Illustrating the point using examples. a.

What are the elements of control identified by IFRS 10? Illustrating the point using examples. a.

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter12: Fainancial Statement Analysis
Section: Chapter Questions
Problem 98.3C
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Can you please help mi with only question a) ?
The following points are relevant to the preparation of the consolidated accounts: (1) Bam Ltd acquired 70% of the ordinary £1 shares of Gem Ltd on 1 January 2021 for £160,000 in cash. The balance of the retained profit in Gem Ltd was £75,000 at acquisition. The fair value of Gem Ltd's non-current assets at the date of acquisition was £33,000 higher than their book value and it related to land. Gem Ltd does not account for this increase in its own accounts. (2) On 1 January 2021 Bam Ltd acquired 30% of Rod Ltd's issued share capital for £60,000 when its retained profit stood at £18,000. There is no difference between the book value and the fair value of the net assets at the date of acquisition. (3) Bam Ltd sold goods to Gem Ltd for £15,000 in June 2021. The original cost of these goods was £12,000. Half of these goods were included in Gem Ltd's closing inventory on 31 December 2021. (4) Goodwill arising on acquisition is subject to impairment review. For the year ended 31 December 2021, goodwill impairment on acquisition of Gem Ltd was £5,000. (5) Non-controlling interest (NCI) is determined using the partial goodwill method (Method 1). Required: What are the elements of control identified by IFRS 10? Illustrating the point using examples. a. b. Prepare the consolidated statement of financial position (CSFP) as at 31 December 2021 and consolidated income statement (CIS) for the year ended 31 December 2021.
Transcribed Image Text:The following points are relevant to the preparation of the consolidated accounts: (1) Bam Ltd acquired 70% of the ordinary £1 shares of Gem Ltd on 1 January 2021 for £160,000 in cash. The balance of the retained profit in Gem Ltd was £75,000 at acquisition. The fair value of Gem Ltd's non-current assets at the date of acquisition was £33,000 higher than their book value and it related to land. Gem Ltd does not account for this increase in its own accounts. (2) On 1 January 2021 Bam Ltd acquired 30% of Rod Ltd's issued share capital for £60,000 when its retained profit stood at £18,000. There is no difference between the book value and the fair value of the net assets at the date of acquisition. (3) Bam Ltd sold goods to Gem Ltd for £15,000 in June 2021. The original cost of these goods was £12,000. Half of these goods were included in Gem Ltd's closing inventory on 31 December 2021. (4) Goodwill arising on acquisition is subject to impairment review. For the year ended 31 December 2021, goodwill impairment on acquisition of Gem Ltd was £5,000. (5) Non-controlling interest (NCI) is determined using the partial goodwill method (Method 1). Required: What are the elements of control identified by IFRS 10? Illustrating the point using examples. a. b. Prepare the consolidated statement of financial position (CSFP) as at 31 December 2021 and consolidated income statement (CIS) for the year ended 31 December 2021.
Question 1 The statements of financial position for Bam Ltd, Gem Ltd and Rod Ltd as at 31 December 2021 and the income statements for the year ended 31 December 2021 are set out below: Statements of Financial Position as at 31 December 2021 Bam Ltd Gem Ltd Rod Ltd Non-current assets 705,000 241,800|| 125,250 Investment in Gem Ltd 160,000 Investment in Rod Ltd 60,000 925,000|| 241,800| 125,250 Net current assets 172,500 84,000 42,000 Non-Current Liabilities |-142,500 -60,000|| -65,000 Net Assets 955,000|| 265,800|| 102,250| Ordinary shares @ £1 each|| 420,000|| 105,000 45,000 Share Premium 30,000 Retained profit 505,000 160,800 57,250 955,000 265,800|| 102,250 Income Statements for the year ended 31 December 2021 Bam LtdGem Ltd Rod Ltd Sales 1,116,000 795,000|| 420,000 Cost of sales -712,500-552,000|-296,250 Gross profit 403,500 243,000|| 123,750 Operating expenses -182,100||-115,950 -61,500 Operating profit 221,400 127,050 62,250 Interest -18,525 -4,200 -4,550 Profit before tax (PBT) 202,875 122,850 57,700 Tax Тах -72,750 -37,050 -18,450 Profit after tax (PAT) 130,125 85,800 39,250
Transcribed Image Text:Question 1 The statements of financial position for Bam Ltd, Gem Ltd and Rod Ltd as at 31 December 2021 and the income statements for the year ended 31 December 2021 are set out below: Statements of Financial Position as at 31 December 2021 Bam Ltd Gem Ltd Rod Ltd Non-current assets 705,000 241,800|| 125,250 Investment in Gem Ltd 160,000 Investment in Rod Ltd 60,000 925,000|| 241,800| 125,250 Net current assets 172,500 84,000 42,000 Non-Current Liabilities |-142,500 -60,000|| -65,000 Net Assets 955,000|| 265,800|| 102,250| Ordinary shares @ £1 each|| 420,000|| 105,000 45,000 Share Premium 30,000 Retained profit 505,000 160,800 57,250 955,000 265,800|| 102,250 Income Statements for the year ended 31 December 2021 Bam LtdGem Ltd Rod Ltd Sales 1,116,000 795,000|| 420,000 Cost of sales -712,500-552,000|-296,250 Gross profit 403,500 243,000|| 123,750 Operating expenses -182,100||-115,950 -61,500 Operating profit 221,400 127,050 62,250 Interest -18,525 -4,200 -4,550 Profit before tax (PBT) 202,875 122,850 57,700 Tax Тах -72,750 -37,050 -18,450 Profit after tax (PAT) 130,125 85,800 39,250
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