Question Six The statements of comprehensive income and changes in equity for Y and its subsidiary, AZ for the year ended December 2012 are shown below: AZ XY $000 $O00 Statement of comprehensive income for the year ended 31 December 2012 Revenue 3200 2400 Cost of sales -1800 -1400 Gross profit 1000 tve expenses Distribution costs -300 -150 750 600 Investment income (note 5) 400 -140 -110 Finance costs Profit before tax 1010 490 Income tax expense -160 -150 340 Profit for the year 850 Other comprehensive income that will not Revaluation of property, plant and equiprment Tax effect of other comprehensive income reclassified profit or loss 40 30 -12 10 Other comprehensive income for the year, net of tax 28 20 Total comprehensive income for the year 878 360 fchanges in equity for the year ended 31 December 2012 Statement XY A2 $O00 $000 Equity at 1 January 2012 12000 8200 Total comprehensive income 878 360 Dividends -600 400 Equity :31 December 2012 12278 8160 1. XY acquired 80 % of the 1 million $1 equity shares in AZ on 1 January 2009 when AZ's retained earnings were $5,000,000. The non-controlling interest was valued sisted of the following: its fair value of $1.350,000 at the acquisition date. The consideration for the acquisition con- $1,593,000 paid on 1 January 2009; Cash 8% was applied to value the liability in the financial statements of Cash of $1,000,000 paid on 1 January 2011 (a discount rate XY); and The transfer of 1,000,000 shares in XY with a nominal value of $1 each and an agreed value on the date of acquisition of $3 each . AS dt anuary that had a fair wolu higherEame aste ry s were asse remaining useful life of 6 years from the date of acquisition. Depreciation is charged to cost of sales. . On 31 December 2012 the goodwill arising on the acquisition of AZ has heen impaired by 20 %. There have been no previous impairments and impairments are charged to administrative expenses. In the year to 31 December 2012, AZ sold goods to XY with a sales value of $300,000. 20 % the year end. AZ earns 25 % gross margin on all sales. the items remain in XY's inventories The investment income recorded in XY's tinancial statements relates to: Dividend income from AZ, which has been correctly treated in XY's individual financial statements Income from a trade investment in another entity, LM. XY has a 10 % shareholding in LM. Required: (a) Prepare the consolidated statement of comprehensive income and the consolidated statement of changes in equity for the XY Group r the year ended 31 December 2012. (20 marks) On 1 February 2013, XY acquired a further investment in LM. XY now holds a total of 60 % of the equity share capital of LM. (b) Explain how this additional acquisition will impact on the preparation of the consolidated financial statements for the year to 31 December 2013. 5 marks) (Total for Question Six 25 marks)
