Question 3 The summarised Statements of Profit or Loss for Port Plc and Starboard Ltd for the year ended 31 December 2020 are shown below. Neither company had any Other Comprehensive Income in the year.

Port Plc 000

Starboard Ltd 000 Revenue 5,200 2,200 Cost of sales (1,100) (480) Gross profit 4,100 1,720 Operating expenses (760) (300) Operating profit 3,340 1,420 Investment income 160 - Profit before tax 3,500 1,420 Taxation (1,200) (220) Profit for the year 2,300 1,200

Additional information: 1. Port Plc bought 1,400,000 of the 2,000,000 1 ordinary shares of Starboard on 1 January 2020 for 7,500,000. On the date of acquisition, Starboards reserves totalled 7,000,000. It is group policy to measure non-controlling interest (NCI) at fair value (Method 2). The fair value of the NCI in Starboard on 1 January 2020 was 3,100,000. On 31 December 2020, an impairment review indicated that the goodwill arising on the acquisition of Starboard Ltd was impaired by 20%. 2. In December 2020, Port Plc sold goods to Starboard Ltd for 80,000. At the year- end, 50% of these goods remained in Starboards inventory. Port earns a margin of 40% on all sales. 3. On 1 July 2020, Starboard Ltd sold land to Port Plc for consideration of 20,000. Starboard had bought the land on 1 July 2019 for 14,000. Land is not depreciated. 4. In the year ended 31 December 2020, Starboard Ltd declared and paid a total ordinary dividend of 200,000. Port Plc did not declare a dividend.

Required: a) Prepare the Consolidated Statement of Profit or Loss for the Port Plc group for the year ended 31 December 2020. Your answer should show the amounts of Profit for the year attributable to the shareholders of the parent and to the NCI.

18 marks

b) Explain the reasons for the consolidation adjustments which you made in relation to the intercompany sale of goods described in note 2. above. 4 marks

c) Prepare the analysis of movements in the NCI which would be included in the groups Statement of Changes in Equity for the year ended 31 December 2020. 25 marks.