=+Question 2 (Based on ICAI, P3 Summer 2000, Question 1)

You are the accountant for EARTH plc group, reporting directly to the Finance Director.

EARTH ple group consists of three companies: EARTH plc, WIND Limited, and WATER Limited. The individual company profit and loss accounts for the year ended 31 December 2003 and statements of financial position as at that date are presented below.

568 INTERNATIONAL FINANCIAL ACCOUNTING AND REPORTING Statement of Comprehensive Income for the Year Ended 31 December 2003 EARTH ple WIND Limited WATER Limited

€ million € million € million Revenue 460 250 300 Cost of sales (180) (70) (100)

Gross profit 280 180 0 Net operating expenses (70) (30) (20)

Operating profit 210 150 180 Investment income 61 - -

Interest payable (30) (10) (10)

Profit on ordinary activities before 241 140 170 tax Tax on ordinary activities 60)" x (40) (50)

Profit on ordinary activities after 191 : 100 120 tax Dividends proposed (80) (50) (70)

Retained profit for the year 1 50 50 Statement of Financial Position as at 31 December 2003 EARTH plc WIND Limited WATER Limiteds

€ million € million € million ASSETS Non-current Assets Property, plant and equipment 540 280 300 Investments a _- _-

1,290 280 300 Current Assets Inventory 240 180 150 Receivables 120 170 160 Bank and cash _ 480 10 10 29. ASSOCIATES 569 EQUITY AND LIABILITIES Capital and Reserves

€1 ordinary shares 600 200 160 Retained earnings 1,370 310 360 15970 510 520 Current Liabilities 160 130 100 2,130 640 620 Additional Information