June 2024
Note 1. Alpha’s investment in Beta – details of Alpha’s investment in Beta.
Note 2. Beta goodwill – details of an impairment review of the goodwill on
acquisition of Beta.
Note 3. Inter-company trading – details of trading between Alpha and Beta.
Note 4. Alpha hedge – details of the hedge of a future firm commitment taken out
on 30 September 20X7.
Requirements
Diploma In International Financial Reporting (DipIFR) June 2024 Sample Answers
1 Consolidated statement of financial position of Alpha at 31 December 20X8
[all numbers in ’000]
$’000
Assets
Non-current assets
Property, plant and equipment (W7) 732,500
Goodwill (W2) 33,900
Intangible asset (W1) 21,000
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787,400
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Current assets
Inventories (125,000 + 90,000 – 5,000 (W5)) 210,000
Trade receivables (100,000 + 80,000) 180,000
Cash and cash equivalents (40,000 + 30,000) 70,000
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460,000
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Total assets 1,247,400
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Equity and liabilities
Equity attributable to equity holders of the parent
Share capital ($1 shares) 200,000
Retained earnings (W5) 291,700
Other components of equity (W6) 65,500
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560,200
Non-controlling interest (W4) 65,100
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Total equity 622,300
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Non-current liabilities
Long-term borrowings (150,000 + 60,000) 210,000
Deferred tax (W8) 145,100
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Total non-current liabilities 355,100
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Current liabilities
Trade and other payables (90,000 + 80,000) 170,000
Current tax payable (60,000 + 40,000) 100,000
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Total current liabilities 270,000
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Total liabilities 625,100
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Total equity and liabilities 1,247,400
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Workings (all numbers in $’000)
Working 1 – Net assets table for Beta
1 January 31 December
20X6 20X8
$’000 $’000
Per financial statements of Beta
Share capital 120,000 120,000
Retained earnings: 35,000 85,000
Fair value adjustments:
Property, plant and equipment (post-acquisition additional depreciation =
18,000 x 1/4 x 3 = 13,500) 18,000 4,500
Brand (post-acquisition amortisation = 30,000 x 1/10 x 3 = 9,000) 30,000 21,000
Deferred tax on fair value adjustments (20%) (9,600) (5,100)
Other components of equity 25,000 35,000
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Net assets for the consolidation 218,400 260,400
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Increase in net assets (260,400 – 218,400) = 42,000. 10,000 of this relates to other components of equity and the balance of
32,000 (42,000 – 10,000) to retained earnings.
Note: Marks for the split awarded in W5 and W6.
3
Working 2 – Goodwill on acquisition of Beta
$’000
Cost of investment 207,900
Non-controlling interest at date of acquisition (218,400 (W1) x 25%) 54,600
Net assets at date of acquisition (W1) (218,400)
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44,100
Impairment at 31 December 20X8 (W3) (10,200)
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Goodwill at 31 December 20X8 33,900
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Working 3 – Impairment of Beta Goodwill
$’000
Total
Net assets of Beta at 31 December 20X8 260,400
Grossed up goodwill (44,100 x 100/75) 58,800
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319,200
Recoverable amount (higher of VIU and FVLCOD) 305,600
So gross impairment equals 13,600
Group share only recognised 10,200
Working 4 – Non-controlling interest in Beta
$’000
At date of acquisition (W2) 54,600
25% of post-acquisition increase in net assets (25% x 42,000 (W1)) 10,500
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65,100
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Working 5 – Retained earnings
$’000
Alpha – per draft SOFP 295,000
75% of post-acquisition share of Beta (75% x 32,000 (W1)) 24,000
Unrealised profit on sales to Beta (20,000 x 1/4) (5,000)
Acquisition costs of Beta (2,100)
Impairment of Beta goodwill (W4) (10,200)
Reversal of profit on de-recognition of derivative (10,000)
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291,700
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Working 6 – Other components of equity
$’000
Alpha – per draft SOFP 80,000
75% of post-acquisition share of Beta (75% x 10,000 (W1)) 7,500
20X7 derivative gain set against the cost of hedged PPE (22,000)
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65,500
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Working 7 – Property, plant and equipment
$’000
Alpha + Beta (per own financial statements – 500,000 + 260,000) 760,000
Fair value adjustment (W1) 4,500
Gain on hedging derivative set against cost (32,000)
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732,500
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Working 8 – Deferred tax
$’000
Alpha + Beta (per own financial statements – 100,000 + 40,000) 140,000
Deferred tax on fair value adjustments (W1) 5,100
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145,100
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