Question 4

Investment in associates

The summarised Statements of Financial Position of three companies at 30 June 2015 are shown below: Additional information: (i) On 1st July 2011, A Ltd bought 12m ordinary shares in B Ltd for $50m, when the retained earnings in B Ltd were $30m. At that date, machinery, owned by B Ltd, had a fair value of $20m more than its book value. This machinery had been purchased on 1st July 2010 and was still in use today. The group policy is to depreciate machinery on a straight-line basis over 6 years. (ii) On 1st July 2014, A Ltd bought 20m ordinary shares in C Ltd for $30m, enabling it to exercise a significant influence over the company. At that date, the retained earnings of C Ltd were $21m and the fair value of all the assets in C Ltd closely approximated their book value. (iii) Impairment reviews A Ltd carried out recently on both companies suggest that the goodwill on the acquisition of B Ltd should be reduced by $2m but that the goodwill on the acquisition of C Ltd should remain unaltered. (iv) B Ltd sold $6m of inventory, which had cost them $4m, to A Ltd during the year to 30th June 2015. At the year end, A Ltd had sold on 70% of this inventory to a third party. (v) There has been no change to the share capital of B Ltd or C Ltd since the date A Ltd acquired shares in the companies. Required: Prepare the consolidated statement of financial position of the A Group at 30 th June 2015