Question
Pra Ltd, a public limited liability company in Ghana, operates in the manufacturing sector. Pra Ltd has investments in two other Ghanaian companies. The draft
- Pra Ltd, a public limited liability company in Ghana, operates in the manufacturing sector. Pra Ltd has investments in two other Ghanaian companies. The draft statement of financial position as at 31 March 2018 are as follows:
Assets: Non Current Asset | Pra GHmillion | Bosomtwe GHmillion | Ayensu GHmillion |
Property, Plants and Equipment | 720.00 | 550.00 | 650.00 |
Investment in Subsidiaries |
|
|
|
Bosomtwe Ltd | 625.00 |
|
|
Ayensu Ltd | 155.00 | 635.00 |
|
Financial Assets | 160.00 | 10.50 | 70.50 |
| 1660.00 | 1195.50 | 720.50 |
Current Assets | 447.50 | 340.50 | 75.00 |
Total Asset | 2107.50 | 1536.00 | 795.50 |
Equity and Liability |
|
|
|
Stated Capital | 875.00 | 605.00 | 400.00 |
Retained Earnings | 620.00 | 465.00 | 175.00 |
Other component of Equity | 62.50 | 40.00 | 47.50 |
Total Equity | 1557.50 | 1110.00 | 622.50 |
Non-current Liabilities | 492.50 | 382.50 | 75.00 |
Current Liabilities | 57.50 | 43.50 | 98.00 |
Total Liabilities | 550.00 | 426.00 | 173.00 |
Total Equity and Liabilities | 2107.50 | 1536.00 | 795.50 |
Additional information:
i) On 1 April 2016, Pra Ltd acquired 14% of the equity interest of Ayensu Ltd for a cash consideration of GH130 million and Bosomtwe Ltd acquired 70% of the equity interest of Ayensu Ltd for a cash consideration of GH635 million. At 1 April 2016, the identifiable net assets of Ayensu Ltd had a fair value of GH495 million, retained earnings were GH95 million and other components of equity were GH26 million. At 1 April 2017, the identifiable net assets of Ayensu Ltd had a fair value of GH575 million, retained earnings were GH120 million and other components of equity were GH35 million. The excess in fair value is due to non-depreciable land. The fair value of the 14% holding of Pra Ltd in Ayensu Ltd, which was classified as fair value through profit or loss, was GH140 million at 31 March 2017 and GH155 million at 31 March 2018. However, the fair value of Bosomtwe Ltds interest in Ayensu Ltd had not changed since acquisition.
ii) On 1 April 2017, PraLtd acquired 60% of the equity interests of Bosomtwe Ltd, a public limited liability company in Ghana. The cost of investment comprised cash of GH625 million. On 1 April 2017, the fair value of the identifiable net assets acquired was GH975 million and retained earnings of Bosomtwe Ltd were GH325 million and other component of equity were GH27.5 million. The excess in fair value is due to non-depreciable land. It is the groups policy to measure the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiarys net assets.
Required:
Prepare the group consolidated statement of financial position of PraLtd as at 31 March 2018. (20marks)
b) A company grants 2,000 share options to each of its three directors on 1 January 2012 subject to the directors being employed on 31 December 2014. The options vest on 31 December 2014. The FV of each option on 1 January 2012 is GHC10 and it is anticipated that all of the share options will vest on 31 December 2014.The options will only vest if the companys share price reaches GHC14 per share. The price at 31 December 2012 was GHC8 and it is not anticipated that it will rise over the next two years. It is anticipated that there will only be two directors employed on 31 December 2014.
Requirement
How will the share options be treated in the financial statements for the year ended 31 December 2012?
- On 1 January 2021 Abacus Co purchases a debt instrument for its fair value of GHS1,000. The debt instrument is due to mature on 31 December 2025. The instrument has a principal amount of GHS1,250 and the instrument carries fixed interest at 4.72% that is paid annually. (The effective interest rate is 10%.)
Required:
How should Abacus Co account for the debt instrument over its five-year term?
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