Protea Ltd is an exporter of South African flowers. Together with a group of companies, Protea Ltd created a well-known name for delivering the most beautiful flowers worldwide. Protea Ltd (Protea) is listed on the JSE. The financial year-end of the Protea Group is 31 December.
The following extract of the financial statements of Protea and the companies in which it has an interest, are presented to you:
STATEMENTS OF FINANCIAL POSITION AT 31 DECEMBER 2020
                                                    Protea                Rose           Tulip
                                                        R                     R                 R
ASSETS
Non-current assets
Equipment                                     1 600 000        1 480 000         60 000
Machinery                                         720 000           785 000     150 000
Investment in Rose Ltd at cost          1 770 000                  -                 -
Investment in Tulip Ltd at cost            100 000                  -                 -
Deferred tax                                          7 000                4 000        2 100
Current assets                                   809 000            982 000      393 900
Total assets                                     5 006 000         3 251 000      606 000
EQUITY AND LIABILITIES
Share capital                                   3 000 000         2 400 000      120 000
Retained earnings                             1 692 000              840 000    343 000
Non-current liabilities                            10 000                   -               -
Current liabilities                                 304 000             11 000        143 000
Total equity and liabilities                   5 006 000        3 251 000        606 000

 

EXTRACT FROM THE STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2020
                                                           Protea                  Rose         Tulip
                                                              R                        R                R
Profit before tax                                  1 014 000             363 000        211 000
Income tax expense                              (294 000)             (105 000)      (61 000)
Profit for the year                                  720 000              258 000       150 000
Other comprehensive income                       -                          -                -
TOTAL COMPREHENSIVE INCOME        720 000             258 000     150 000

 

Investment in Rose Ltd:
• Protea acquired a 60% share in Rose Ltd (Rose) on 1 January 2017 for R1 770 000. Rose had the following balances on the acquisition date:
                                      Rand
Share capital                 2 400 000
Retained earnings             240 000
• On 1 January 2017, the net assets were fairly valued except for certain equipment which, Protea revalued to a net replacement value of R660 000. On 1 January 2017, Rose's records showed the following in respect of this equipment:
                                                Rand
Equipment at cost                     600 000
Accumulated depreciation         (120 000)
                                               480 000
• Protea was satisfied with the estimate of the remaining useful life of four years of this equipment. The revaluation was not recorded in the records of Rose. Rose sold this equipment on 30 April 2020 for R115 000.

• On 1 January 2020, Rose sold a flower press machine to Protea. The flower presser was invoiced at cost plus 10% to Protea. The invoiced price was R1 320 000. Protea estimated the remaining useful life of the flower press on 1 January 2020 at five years with no residual value.

Investment in Tulip Ltd:
• On 1 January 2018, Protea acquired a 40% interest in Tulip Ltd (Tulip) for R100 000. Tulip's retained earnings was R90 000 on this date. There were no other reserves. Since 1 January 2018, Protea has exercised significant influence over the financial and operating policies of Tulip. All assets and liabilities were fairly valued.
• Since 1 January 2019, Tulip has been selling flowers (inventory) to Protea at a profit of 20% on cost. Included in Protea's inventory on 31 December 2019 is R24 000 (cost to Protea) regarding such inventory. Included in the inventory of Protea on 31 December 2020 is R33 000 (cost to Protea) regarding such inventory. Total sales of Tulip to Protea amounted to R60 000 for the 31 December 2020 financial year.

Additional information:
• Protea accounts for depreciation using the straight-line method.
• Assume a tax rate of 28%. Ignore Dividend tax, VAT, and Capital Gains tax.
• No impairment on goodwill is applicable, from the time that the investments were acquired to the end of the current reporting period.
• The share capital of Protea, Rose, and Tulip remained unchanged since incorporation.
• Protea's policy is to measure the non-controlling interest at its proportionate share of the acquiree's net identifiable assets at the date of the business combination.
• The investment in Tulip has been accounted for according to the equity method in the consolidated financial statements.
• Protea's policy is to classify investments in subsidiaries and associates at a cost in its separate financial statements.

REQUIRED:
1.1) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2020 of Protea Ltd and its group to comply with International Financial Reporting Standards (IFRSs).  
1.2) Prepare the Consolidated Statement of Changes in Equity for the year ended 31 December 2020 of Protea Ltd and its group to comply with International Financial Reporting Standards (IFRSs).
• Notes to the financial statements and comparatives are not required.
• Clearly show all calculations and work to the nearest Rand. Assume all items and amounts to be material, unless the contrary is clear from the information given.