THE INSTITUTE OF FINANCE MANAGEMENT

AFU08051: ADVANCED FINACIAL REPORTING

ASSIGNMENT
INSTRUCTIONS:
1. THIS ASSIGNMENT SHOULD COMPRISE A GROUP OF AT LEAST 5
STUDENTS AND AT MOST 10 STUDENTS (ie 5 ≤ GROUP MEMBERS ≤ 10).
LESS THAN FIVE SHOULD SEEK PERMISSION FROM THE COURSE
INSTRUCTOR.
2. THIS ASSIGNMENT CARRIES 12% OF YOUR COURSE ASSESSMENT

3. ALL MEMBERS ARE REQUIRED TO PARCIPATE FULLY IN THE GROUP

ASSIGNMENT

4. ANY MEMBER(S) FAILS TO PARCIPATE, SIGNATURES OF AT LEAST 70%

(7 out of 10 members) OF ALL MEMBERS WILL BE REQUIRED TO
DISQUALIFY HIM/HER FROM THE ASSIGNMEMENT AND A ZERO MARK
WILL BE REWARDED AS A RESULT

5. THE DEADLINE OF SUBIMISSION IS WEDNESDAY 31ST JANUARY 2024,

4:00PM

6. SUBMIT PDF SCANED COPY VI ELEARNING ACCOUNT (ONLY

ONE GROUP MEMBER’S ACCOUNT SHOULD BE USED TO SUBMIT
AN ASSIGNMENT SUBMISSION OF MORE THAN ONE INDIVIDUAL
IN A GROUP MAY LEAD INTO THE MARKS BEING DIVIDED BUT
NUMBER OF SUBMISSIONS MADE. A PAGE OF SIGNED NAMES TO
BE ATTACHED AND SIGNED BY ALL PARTICIPATING GROUP
MEMBERS

7. YOUR SUBMISSION SHOULD BE TYPED OR HAND WRITTEN

8. PLEASE MAKE SURE YOU PARTICIPATE IN SOLVING ALL PROBLEMS,

NO FORGOTTEN NAMEs WILL BE ADDED TO ANY GROUP AFTER THE
SUBMISSION IS MADE. IF THAT HAPPENS AND ACCEPTED THE WHOLE
GROUP WILL LOSE 5 OUT OF 12 MARKS FOR SUCH ACTION.

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QUESTION ONE

Eagle, Heron & Sparrow

On 1 October 2016 Eagle plc acquired, for Tzs 316,000,000; 80,000 Tzs 1,000 ordinary
shares in Heron Ltd. The profit and loss reserves at the date of acquisition totalled Tzs
250,000,000.

On 30 September 2010 Eagle plc acquired, for Tzs 47,000,000; 20,000 Tzs 1000 ordinary
shares in Sparrow Ltd. The profit and loss reserves at the date of acquisition totalled Tzs
35,000,000.

Summarised balance sheets at 30 September 2022, and profit and loss accounts for the year
ended on that date were as follows:

Eagle plc Heron Ltd Sparrow Ltd

Tzs ‘000’ Tzs ‘000’ Tzs ‘000’
Profit & loss accounts
Operating profit 147,000 54,000 51,000
Interest (20,000) (5,000) (4,000)
Profit before tax 127,000 49,000 47,000
Taxation (42,000) (23,000) (15,000)
Profit for the year 85,000 26,000 32,000
Balance sheets
Investments:
Subsidiary 316,000 - -
Associate 47,000 - -
Other net assets 308,000 441,000 128,000
671,000 441,000 128,000
Share capital 220,000 100,000 50,000
Profit & loss reserves 451,000 341,000 78,000
671,000 441,000 128,000

1. Following an impairment review of goodwill in 2023, Tzs 9,000,000 of the goodwill

relating to Heron was written off.

2. Heron did not pay any dividends during the year to 30 September 2023. Sparrow paid a
dividend of Tzs 10,000,000 in 2023.

3. Eagle includes dividends received in operating profit.

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4. During the year to 30 September 2023 Sparrow sold goods to Eagle for Tzs 40,000,000.
These goods had cost Sparrow Tzs 33,500,000. At 30 September 2023 Eagle had 25% of
these goods in stock.

Required:
Prepare the Eagle plc’s consolidated profit and loss account and consolidated balance
sheet for the year ended 30 September 2023

QUESTION TWO
You are the group accountant for Marshall plc (‘Marshall’) and are responsible for the
preparation of the group financial statements for the year to 31 December 2022.

Marshall has long-term investments in three companies, Polland Ltd (‘Polland’), Holt
Ltd (‘Holt’) and Cumming Ltd (‘Cumming’). The initial investment in Polland was made
in 2021 but Marshall increased its stake on
31 December 2022. Details of the investments in the three companies are given in
Appendix 1.

The financial statements of Marshall, Polland, Holt and Cumming for the year to 31
December 2022 have been received and are included in Appendix 2. All four companies
follow similar accounting policies in the preparation of their accounts.

Additional information regarding the companies is given in Appendix 3.

Required:

(i) Prepare consolidation journal entries to incorporate Polland, Holt and Cumming into
the Marshall group accounts for the year to
31 December 2022;

(ii) Prepare the consolidated income statement for the Marshall group for the year to 31
December 2022 in accordance with IAS 1.

(iii) In what circumstances a parent can be exempted to prepare consolidated financial

statements?

Appendix 1

Marshall plc (‘Marshall’) has the following investments.

Company Number of Date Cost

Shares acquired Tzs ‘000,000’

Polland Ltd 2,000,000 2022 2,300

Polland Ltd (see note 4) 100,000 2018 222
Holt Ltd 300,000 2011 1,150
Cumming Ltd 200,000 2013 750

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Additional information on investments.

1. The share capital of the companies is made up of:

Marshall Tzs 250 ordinary shares

Polland Tzs 250 ordinary shares
Holt Tzs 1,000 ordinary shares
Cumming Tzs 500 ordinary shares

2. The reserves at the date of acquisition of each of the companies was:

Share Revaluation Profit and

Premium Reserve Loss Reserves
Tzs 000,000 Tzs 000,000 Tzs 000,000

Polland (2008) 700 200 1,000

Holt 200 - 1,800

Cumming 1,000 - 1,500

All other movements in revaluation reserves took place in 2016.

3. Marshall and four other venturers share control of Cumming under a contractual
arrangement. Cumming is a separate entity from each of the venturers.

4. On 31 December 2022 Marshall acquired an additional 100,000 ordinary shares of

Polland for Tzs 222,000,000. These shares are in addition to the 2,000,000 acquired in
2011. No entries have been made in the records of Marshall for this additional
investment.

Appendix 2

The financial statements of the companies for 2022 are as follows.

Profit and loss accounts

Year to 31 December 2022

(All figures in Tzs ‘000,000’)

Marshall Polland Holt Cumming
Turnover 28,000 12,500 8,000 10,000
Cost of sales (18,000) (6,800) (5,000) (6,000)
Gross profit 10,000 5,700 3,000 4,000
Operating expenses (net) (3,500) (2,400) (800) (1,200)
Operating profit 6,500 3,300 2,200 2,800
Interest paid (300) (400) (100) (400)
Profit for the year 6,200 2,900 2,100 2,400
Taxation (1,800) (850) (600) (500)
Profit after tax 4,400 2,050 1,500 1,900

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Balance Sheets
As at 31 December 2022
(All figures in Tzs ‘000,000’)
Marshall Polland Holt Cumming
Fixed assets - tangible 13,500 4,000 3,500 6,000
- investments 4,200 - - -
Current assets
Stock 1,600 600 500 700 Debtors
2,800 400 600 800
Bank 700 100 300 200
5,100 1,100 1,400 1,700
Creditors: amounts falling
due within one year (3,000) (800) (500) (600)

Net current assets 2,100 300 900 1,100

Total assets less current
liabilities 19,800 4,300 4,400 7,100
Creditors:
amounts falling due in
more than one year (3,600) (200) (600) (2,000)
16,200 4,100 3,800 5,100

Capital and reserves

Share capital 2,000 625 1,000 500

Share premium 2,100 700 2001,000

Revaluation reserve 6,000 400 - 600

Profit and loss reserve 6,100 2,375 2,600 3,000

16,200 4,100 3,800 5,100

Appendix 3

Additional information.

1. Marshall includes dividends from investments in arriving at net operating expenses.

2. At 31 December 2022 Polland owed Marshall Tzs 31,000,000. Marshall, however,

included Polland as a debtor of Tzs 36,000,000.

On 28 December Polland Ltd sent a cheque for Tzs 5,000,000 to Marshall but Marshall did
not receive and record this item until 4 January 2023.

3. Cumming owed Polland Tzs 40,000,000 at 31 December 2022. Polland included Cumming
as a debtor of Tzs 40,000,000 at that date.

4. During the year to 31 December 2022 Cumming sold goods to Marshall. The goods cost

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 Cumming Tzs 120,000,000 and Cumming achieved a gross margin of 25% on the sale. At
31 December 2022 Marshall had a quarter of these goods in stock.

5. Polland acquired a fixed asset for Tzs 200,000,000 in 2019. During 2022 this asset was
sold to Marshall for Tzs 175,000,000. The asset had a useful life of 8 years when acquired.
The group policy is to charge a full year’s depreciation in year of acquisition and none in
the year of disposal and is to depreciate transferred assets over their remaining useful life.

6. Group policy is to review goodwill for impairment annually. Impairment losses relating to
goodwill are as follows:

Prior to 2022 2022

Tzs 000,000 Tzs 000,000
Goodwill of Polland 168 28
Goodwill of Cumming 30 15

No adjustments have been made for these impairments in the individual accounts in
Appendix 2. Group policy is to include impairment losses on goodwill in operating
expenses.

7. The following dividends were paid by the companies during the year:

Tzs 000,000
Marshall 2,000
Polland 1,400
Holt 800
Cumming 1,500

QUESTION THREE

Gush Ltd

Gush Ltd acquired 75% of the ordinary shares in Lopo Corporation for £2,000,000 on 1
January 2021. The share capital and reserves of Lopo Corporation were as follows:

1.1.21 31.12.21 31.12.22

Ym Ym Ym

Share capital – ordinary 200 200 200

Profit and loss reserve 350 410 460

550 610 660

The following rates of exchange existed:

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1.1.21 Y 220 = £
Average for 2020 Y 230 = £

31.12.21 Y 240 = £

Average for 2022 Y 235 = £

31.12.21 Y 228 = £

Goodwill is to be impaired by 40% in 2022.

Required:

(a) Calculate the translation gains/(losses) arising from share capital and reserves for
the years to 31 December 2021 and 2022;

(b) Calculate the translation gains and losses arising from goodwill for the years to 31
December 2021 and 2022; and

(b) Produce relevant journal entries for the translation gains/(losses) required for the
preparation of the consolidated accounts for the year to 31 December 2022.

QUESTION FOUR

(A) Mwanawane Ltd operates a defined contribution pension scheme. Under the scheme
employees pay 3% of pensionable salary and the employer 12%. Mwanawane Ltd
pays the monthly pension contribution to the pension scheme on the 19 th of the
following month.

In the year to 31 December 2022 pensionable salaries totalled Tzs 360,000,000

payable in equal monthly instalments.

Required:

(i) Calculate the employer’s pension cost for the year to 31 December 2022;

(ii) Indicate any balance relating to the pension scheme in the balance sheet of
Mwanawane Ltd as at 31 December 2022;

(B) Usichoke Ltd acquired 70% of the ordinary shares in Usishindwe Ltd for Tzs
200,000,000 on 1 January 2018. The share capital and reserves of Usishindwe Ltd were
as follows:

1.1.21 31.12.21 31.12.22

£’000’ £’000’ £’000’
Share capital – ordinary 300 300 300

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 Profit and loss reserve 350 410 460

650 710 760

The following rates of exchange existed:

1.1.2020 Tzs 2,100/£

Average for 2021 Tzs 2,105/£

31.12.2021 Tzs 2,110/£

Average for 2022 Tzs 2,300/£

31.12.2022 Tzs 2,380/£

Goodwill is to be impaired by 40% in 2022.

Required:

(i) Calculate the translation gains/(losses) arising from share capital and reserves for the
years to 31 December 2021 and 2022;
(ii) Calculate the translation gains and losses arising from goodwill for the years to 31
December 2021 and 2022

QUESTION FIVE

AB Ltd received a grant of TZS500,000 from provincial government for creating job vacancies,
for the individuals in the nearby area, and maintaining them for a period of 3 years. The entity
has prepared an expense forecast in respect of this project which is as follows:

TZS’000
Recruitment cost in Y1 50,000
Expected Salary Expense:
Y1 250,000
Y2 275,000
Y3 300,000

Required:
How the receipt of government grant will be accounted for in the financial statements of AB
Ltd?

QUESTION SIX
AB Ltd purchased an energy saving plant for TZS100,000 on 1 January 2019, having useful

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life of 5 years with a residual value of TZS10,000. The entity received a government grant
equal to 20% of the cost of the asset, on the condition that plant must be used at least for period
of 4 years otherwise a repayment will arise on sliding scale basis i.e. 75% of the grant will be
repayable if the asset is sold in the first year and it will diminish by 25% for subsequent years
up to year 4. AB Ltd has no intention to sell plant in first four years.
Required:
How the plant and the related government grant will be accounted for in the financial
statements of AB Ltd for the year ended 31.12.2019 using
i) Gross Up Method
ii) Net Method

QUESTION SIX

Scotia Plc
Scotia plc has a 75% owned subsidiary, Nova Scotia Ltd, a company incorporated in the
USA. The following information has been extracted from the individual company accounts
for 2021:
Profit and loss accounts for the year ended 31 December 2021
Scotia plc Nova Scotia Ltd
£000s $000s
Turnover 20,000 10,080
Cost of sales (10,000) (3,960)
Gross profit 10,000 6,120
Other operating expenses (net) (4,000) (440)
Operating profit 6,000 5,680
Taxation (2,000) (1,080)
Profit for the year 4,000 4,600

Balance sheets as at 31 December 2021

Tangible fixed assets 48,000 32,000

Investment in subsidiary 16,000 -
Current assets 9,500 7,600
Current liabilities (3,500) (5,000)
70,000 34,600

Share capital 50,000 28,000

Profit and loss reserve 20,000 6,600
70,000 34,600

Scotia plc acquired Nova Scotia Ltd on 31 December 2020 when its reserves equalled
$3,000,000.

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Nova Scotia paid a dividend of $1,000,000 in December 2021. Scotia has included its share
of the dividend from Nova Scotia, translated using the closing rate, in net operating expenses.

There is no internal trading.

Goodwill is to be impaired by 25% as at 31 December 2021.

Sterling exchange rates were:-

$
31 December 2020 2.0
Average rate 2021 1.8
31 December 2021 1.6

Required:
Prepare the draft consolidated profit and loss account of Scotia plc for the year ended
31 December 2021 together with the draft consolidated balance sheet as at that date.

QUESTION SEVEN

Oxford plc

The draft financial statements of ‘Oxford plc’ and its Canadian subsidiary, Bonn Inc are set
out below.

Balance sheets at 31 December 2022 Oxford plc Bonn Inc

£000 C$000
Tangible fixed assets 3,240 4,860
Investment in Bonn 870 -

Stocks 1,590 8,316

Debtors 1,630 4,572
Cash 240 2,016
Creditors (5,030) (4,356)
Loans (1,920) ____-
_620, 15,408

Share capital (£1/C$1) 118 1,348

Profit and loss reserve 502 14,060
620 15,408

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Profit and loss accounts for year ended 31 December 2022

Oxford plc Bonn Inc

£000 C$000

Turnover 40,425 97,125

Cost of Sales (35,500) (77,550)
Gross Profit 4,925 19,575
Distribution and administration (4,400) (5,850)
Investment income __740 ____-
Profit before tax 1,265 13,725
Tax __(300) (4,725)
Profit after tax 965 9,000

The following additional information is given:

(1) Exchange rates: C$

31 December 2020 4.16

31 December 2021 4.00
31 December 2022 3.60
Average for 2022 3.75

(2) Oxford acquired 1,011,000 shares in Bonn for £870,000 on 31 December 2020 when
Bonn’s profit and loss reserve stood at C$ 2,876,000.

(3) Bonn paid an interim dividend of C$ 3,752,000 during 2020. Oxford translated this at
C$3.80.

(4) After carrying out an impairment review Oxford plc has decided to write-off 20% of
goodwill in the current year.

(5) The translation reserve in the group balance sheet equalled £62,000 at 31 December
2021. This was made up of:

£’000
Share capital 10
Profit and loss reserves 48
Goodwill 4

Required:

(a) Prepare the consolidated balance sheet at 31 December 2022.

(b) Prepare the consolidated profit and loss account for the year ended 31 December
2022.

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 QUESTION EIGHT

JVC Company purchased a condominium unit in January 1, 2020 and moved into the building
on the same day for TZS 100,000,000. JVC made a down payment of TZS 50,000,000 and the
balance is payable annually for TZS 10,000,000 starting December 31, 2020. The implicit
borrowing rate for this type of loan is 12%
Required: Compute the Capitalizable borrowing costs

QUESTION NINE
Chonde Company had the following borrowings during 2020. The borrowings were made for general
purpose but the proceeds were used to finance the construction of a new building

Principal Interest
12% bank loan TZS 3,000,000 TZS 360,000
14%long term loan TZS 5,000,000 TZS 700,000

The construction began on January 1, 2020 and was completed on December 31, 2020 Expenditures on the
building were TZS 2,000,000 on January 1, TZS 2,000,000 on June 30 and TZS 1,000,000 on December 31
Required:
a) Provide relevant entries in 2020
b) Determine the capitalizable borrowing cost
c) Determine the carrying amount of the building as of December 31, 2020

QUESTION TEN
Tipping hater Company had the following outstanding loans during 2019 and 2020
Specific Construction Loan TZS 3,000,000 10%
General Loan TZs 25,000,000 12%
The entity began self-construction of a new building on January 1, 2019 and the building was completed on
June 30, 2020. The following expenditures were made

January 1, 2019 TZS 4,000,000

April 1, 2019 TZS 5,000,000
December 1, 2019 TZS 3,000,000
March 1, 2020 TZS 6,000,000
Required
a) Provide the relevant entries in 2019 and 2020
b) Determine the capitalizable borrowing costs in 2019 and 2020
c) Compute the interest expense in 2019 and 2020
d) Determine the carrying amount of the building as of
(i) December 31, 2019
(ii) June 30, 2020

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QUESTION ELEVEN
Study the IFRS 12 Disclosure of Interests in Other Entities (IFRS 12 — Disclosure of Interests in Other Entities
([Link]) and make a summary of the standard. (Hint focus on objective and scope, key definitions and
disclosure required) – at least three pages

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