=+Question 1 (Based on ICAI, P3"Autumn 1998, Question 2)

TRUE plc acquired 675,000 shares in FAIR Limited on 1 January 2001. The reserves of FAIR Limited at the date of acquisition comprised revenue reserve of €100,000 and capital reserve of €50,000. With respect to the measurement of non-controlling interests at the date of acquisition, the proportionate share method equated to the fair value method. The draft statements of financial position of both these companies as at 31 December 2003 are given below.

TRUE ple FAIR Limited

€ € € €

ASSETS Non-current Assets Property, plant and equipment 1,750,000 1,050,000 Investments — shares in Fair Limited at cost 950,000 2,700,000 Current assets Inventory 415,000 210,000 Receivables 510,000 240,000 Current account with FAIR Limited 25,000 Bank and cash 200,000 1,150,000 60,000 510,000 3,850,000 1,560,000 584 INTERNATIONAL FINANCIAL ACCOUNTING AND REPORTING EQUITY AND LIABILITIES Capital and Reserves

€1 ordinary shares 2,000,000 750,000 Revenue reserve 950,000 495,000 Capital reserve 300,000 . 75,000 3,250,000 1,320,000 Current Liabilities Trade payables 450,000 185,000 Current account with TRUE Limited : 5,000 Proposed dividend — 150,000 600,000 50,000 240, 000 3,850,000 1,560,000 In addition, the draft statements of comprehensive income of the two companies for the year ended 31 December 2003 are as follows:

TRUE plc FAIR Limited

€ €

Revenue 4,050,000 990,000 %

Cost of sales (2,088,000) (558,000)

Gross profit 1,962,000 432,000 Operating expenses (1,260,000) (198,000)

Trading profit 702,000 234,000 Investment income 45,000 :

Profit before taxation 747,000 234,000 Taxation (180,000) (72,000)

Profit after taxation 567,000 162,000 Ordinary dividends paid (255,000) (50,000)

Ordinary dividends proposed (150,000) (50,000)

Retained profit for the year 162,000 62,000 30. JOINT VENTURES 585 Additional Information