=+Question 2 (Based on ICAI, P3 Summer 1999, Question 4)

Archer PLC owns a number of subsidiaries, and prepares its consolidated financial statements to 31 December each year. During 2003 ARCHER plc purchased interests in BOW Limited and ARROW Limited. Draft statements of comprehensive income for the year ended 31 December 2003 and statements of financial position as at that date for ARCHER Group (excluding BOW Limited and ARROW Limited), and for BOW Limited and ARROW Limited are presented below.

Statement of Comprehensive Income for the Year Ended 31 December 2003 ARCHER BOW ARROW Group Limited Limited

€m €m €m Revenue 3,000 200 1,800 Cost of sales (1,800) (hos) 900 Gross profit 1,200 75 900 Operating expenses 500 (25) 260 586 INTERNATIONAL FINANCIAL ACCOUNTING AND REPORTING Operating profit 700 50 640 Interest payable (20) = 5) 7 1410)

Profit before tax 680 45 630 Tax __(200 _(10) C190}

Profit after tax 480 B5e 440 Dividends paid 180 : 40 Retained profit for year 300 yo 2 400 Statement of Financial Position as at 31 December 2003 ARCHER BOW ARROW Group Limited Limited

€m €m €m ASSETS a ;

Non-current Assets Property, plant and equipment 2,200 40 2,100 Investment in BOW Limited 200 . :

Investment in ARROW Limited _ 800 ™ DLs 62 3,200 40 2,100 Current Assets ‘

Inventory 400 125 250 Receivables 300 - 240 Bank and cash __ 80 200 er IU 3,980 365 2700 EQUITY AND LIABILITIES Capital and Reserves

€1 ordinary shares (equity) 1,200 100 600 Revaluation reserve 600 - 300 Retained earnings 1,700 25 1,500 3,500 333 2,400 Current Liabilities _ 480 30 _ 300 3,980 365 2,700