CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The following draft statements of financial position relate to Glove, Body and Fit, all public limited companies, as at 31 May 20X7.

The following information is relevant to the preparation of the group financial statements.

(a) Glove acquired 80% of the ordinary shares of Body on 1 June 20X5 when Body's other reserves

were R4 million and retained earnings were R10 million. The fair value of the net assets of Body

was R60 million at 1 June 20X5. Body acquired 70% of the ordinary shares of Fit on 1 June

20X5 when the other reserves of Fit were R8 million and retained earnings were R6 million. The

fair value of the net assets of Fit at that date was R39 million. The excess of the fair value over

the net assets of Body and Fit is due to an increase in the value of non-depreciable land of the

companies. There have been no issues of ordinary shares in the group since 1 June 20X5.

(b) Body owns several trade names which are highly regarded in the market place. Body has

invested a significant amount in marketing these trade names and has expensed the costs. None

of the trade names has been acquired externally and, therefore, the costs have not been

capitalised in the statement of financial position of Body. On the acquisition of Body by Glove, a

firm of valuation experts valued the trade names at R5 million and this valuation had been taken

into account by Glove when offering R60 million for the investment in Body. The valuation of the

trade names is not included in the fair value of the net assets of Body above. Group policy is to

amortise intangible assets over ten years.

(c) On 1 June 20X5, Glove introduced a new defined benefit retirement plan. At 1 June 20X5,

there were no unrecognized actuarial gains and losses. The following information relates to the

retirement plan.

The expected average remaining working lives of the employees in the plan is ten years at 31 May 20X6

and 31 May 20X7. Glove wishes to defer actuarial gains and losses by using the 'corridor' approach. The defined benefit liability is included in non-current liabilities.

(a) Glove has issued 30,000 convertible bonds with a three year term repayable at par. The bonds were issued at par with a face value of R1,000 per bond. Interest is payable annually in arrears at a nominal interest rate of 6%. Each bond can be converted at any time up to maturity into 300 shares of Glove. The bonds were issued on 1 June 20X6 when the market interest rate for similar debt without the conversion option was 8% per annum. Glove does not wish to account for the bonds at fair value through profit or loss. The interest has been paid and accounted for in the financial statements. The bonds have been included in non-current liabilities at their face value of R30 million and no bonds were converted in the current financial year.

(b) On 31 May 20X7, Glove acquired plant with a fair value of R6 million. In exchange for the

plant, the supplier received land, which was currently not in use, from Glove. The land had a

carrying value of R4 million and an open market value of R7 million. In the financial statements

at 31 May 20X7, Glove had made a transfer of R4 million from land to plant in respect of this

transaction.

(c) Goodwill has been tested for impairment at 31 May 20X6 and 31 May 20X7 and no impairment loss occurred.

(d) It is the group's policy to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary's identifiable net assets.

(e) Ignore any taxation effects.

Prepare the consolidated statement of financial position of the Glove Group at 31 May 20X7 in

accordance with International Financial Reporting Standards (IFRS).(25 marks)

\begin{tabular}{|c|c|c|c|} \hline Assets & \begin{tabular}{l} Glove \\ Rm \end{tabular} & \begin{tabular}{l} Body \\ Rm \end{tabular} & \begin{tabular}{l} Fit \\ Rm \end{tabular} \\ \hline \multicolumn{4}{|l|}{ Non-current assets } \\ \hline Property, plant and equipment & 260 & 20 & 26 \\ \hline Investment in Body & 60 & & \\ \hline Investment in Fit & & 30 & \\ \hline Available for sale investments & 10 & & \\ \hline Current assets & 65 & 29 & 20 \\ \hline Total assets & 395 & 79 & 46 \\ \hline Ordinary shares & 150 & 40 & 20 \\ \hline Other reserves & 30 & 5 & 8 \\ \hline Retained earnings & & 25 & 10 \\ \hline Total equity & 315 & 70 & 38 \\ \hline Non-current liabilities & 45 & 2 & 3 \\ \hline Current liabilities & 35 & 7 & 5 \\ \hline Total liabilities & 80 & 9 & 8 \\ \hline Total equity and liabilities & 395 & 79 & 46 \\ \hline \end{tabular} \begin{tabular}{lll} & 31 May 20X6 & 31 May \\ & & 207 \\ Unrecognised actuarial losses to date & Rm & Rm \\ Present value of obligation & 3 & 5 \\ Fair value of plan assets & 20 & 26 \\ & 16 & 20 \end{tabular}