SECTION TWO Answer ONE of the TWO questions set in this section 5. The following are the summarised financial statements of three companies, Systope plc, Trimpat plc and Ubart plc, for the financial year ended 31 March 2017: Income Statements for the year ended 31 March 2018 Revenue Cost of sales Gross profit Operating expenses Operating profit Investment income Interest receivable Finance charges Net profit before taxation Taxation Profit for the year Systope 000 13,350 (8,010) 5,340 (1,390) 3,950 560 163 (140) 4,533 (1,090) 3,443 Trimpat 000 12,450 (6,970) 5,480 (1,640) 3,840 90 Ubart 000 5,000 (3,000) 2,000 (1,120) 880 40 35 10 (60) (90) 3,875 (930) 2,945 870 (240) 630 Statements of Financial Position as at 31 March 2018 Systope 000 Trimpat 000 Ubart 000 ASSETS Non-current assets Tangible assets Investments, at cost 23,670 13,981 37,651 12,250 800 13,050 5,560 50 5,610 Current assets Inventory Trade and other receivables Cash and cash equivalents 750 1,080 310 2,140 39,791 590 1,010 130 1,730 14,780 380 420 90 890 6,500 Total assets EQUITY and LIABILITIES Equity Ordinary shares of 1 Retained earnings 24,000 13,051 37,051 9,000 3,300 12,300 3,600 1,840 5,440 Non-current liabilities Redeemable preference shares Loans 400 450 1,250 1,250 900 1,300 450 Current liabilities Trade and other payables Current taxation 730 760 1,490 39,791 530 650 1,180 14,780 440 170 610 6,500 Total equity and liabilities The following additional information is available: The ordinary shares in each company carry one vote each and there are no other voting rights other than those attaching to the ordinary shares. Trimpat plc Systope plc purchased 80% of the ordinary shares in Trimpat plc on 1 April 2017. The purchase consideration was 9,341,000. The retained earnings of Trimpat plc at 1 April 2017 were 805,000. All the assets recognised in Trimpat's Statement of Financial Position as at 1 April 2017 were agreed to be reported at their fair values. Trimpat plc also had internally generated patents and trademarks which were not recognised in its financial statements. It was agreed that the fair value of these patents and trademarks was 516,000 as at 1 April 2017 and 387,000 as at 31 March 2018. The goodwill arising on the acquisition of Trimpat plc was agreed at 1,800,000 and the fair value of the non-controlling interest in Trimpat plc on the acquisition date was 2,780,000. On 1 April 2017 Systope plc made a loan of 400,000 to Trimpat plc. The loan bears interest at 12.5% a year. All interest due on the loan has been paid. The loan will be repayable in full by one payment of 400,000 on 31 March 2027. During the year ended 31 March 2018 Systope plc sold inventory to Trimpat plc for 2,440,000. The cost of this inventory tp Systope Ltd was 1,710,000. On 31 March 2018 Trimpat's inventory figure included 500,000 relating to these goods. The original cost of these goods to Systope plc was 350,000. On 31 March 2018 Trimpat plc had outstanding invoices payable to Systope plc of 200,000. Systope plc controls the composition of the board of directors of Trimpat plc Ubart plc Systope plc purchased 40% of the ordinary shares in Ubart plc on 1 April 2016 for 3,110,000. The retained earnings of Ubart plc were 1,040,000 on 1 April 2016. Systope plc is represented on the board of directors of Ubart plc but does not control its composition. During the year ended 31 March 2018 the companies made the following dividend payments: Systope plc Trimpat plc Ubart plc 4 pence per share 5 pence per share 2.5 pence per share Required Page 9 of 17 / TURN OVER NBS8340 a) Prepare the consolidated statement of profit or loss for Systope plc for the year ended 31 March 2018. Show all supporting workings clearly. (21 marks) b) Prepare the consolidated statement of financial position for Systope plc as at 31 March 2018. Show all supporting workings clearly. (30 marks) c) Distinguish between full consolidation and partial consolidation identifying the circumstances where each would be used under current International Financial Reporting Standards and discuss how the use of these consolidation techniques make published financial statements more useful to external users. (9 marks) Total 60 marks SECTION TWO Answer ONE of the TWO questions set in this section 5. The following are the summarised financial statements of three companies, Systope plc, Trimpat plc and Ubart plc, for the financial year ended 31 March 2017: Income Statements for the year ended 31 March 2018 Revenue Cost of sales Gross profit Operating expenses Operating profit Investment income Interest receivable Finance charges Net profit before taxation Taxation Profit for the year Systope 000 13,350 (8,010) 5,340 (1,390) 3,950 560 163 (140) 4,533 (1,090) 3,443 Trimpat 000 12,450 (6,970) 5,480 (1,640) 3,840 90 Ubart 000 5,000 (3,000) 2,000 (1,120) 880 40 35 10 (60) (90) 3,875 (930) 2,945 870 (240) 630 Statements of Financial Position as at 31 March 2018 Systope 000 Trimpat 000 Ubart 000 ASSETS Non-current assets Tangible assets Investments, at cost 23,670 13,981 37,651 12,250 800 13,050 5,560 50 5,610 Current assets Inventory Trade and other receivables Cash and cash equivalents 750 1,080 310 2,140 39,791 590 1,010 130 1,730 14,780 380 420 90 890 6,500 Total assets EQUITY and LIABILITIES Equity Ordinary shares of 1 Retained earnings 24,000 13,051 37,051 9,000 3,300 12,300 3,600 1,840 5,440 Non-current liabilities Redeemable preference shares Loans 400 450 1,250 1,250 900 1,300 450 Current liabilities Trade and other payables Current taxation 730 760 1,490 39,791 530 650 1,180 14,780 440 170 610 6,500 Total equity and liabilities The following additional information is available: The ordinary shares in each company carry one vote each and there are no other voting rights other than those attaching to the ordinary shares. Trimpat plc Systope plc purchased 80% of the ordinary shares in Trimpat plc on 1 April 2017. The purchase consideration was 9,341,000. The retained earnings of Trimpat plc at 1 April 2017 were 805,000. All the assets recognised in Trimpat's Statement of Financial Position as at 1 April 2017 were agreed to be reported at their fair values. Trimpat plc also had internally generated patents and trademarks which were not recognised in its financial statements. It was agreed that the fair value of these patents and trademarks was 516,000 as at 1 April 2017 and 387,000 as at 31 March 2018. The goodwill arising on the acquisition of Trimpat plc was agreed at 1,800,000 and the fair value of the non-controlling interest in Trimpat plc on the acquisition date was 2,780,000. On 1 April 2017 Systope plc made a loan of 400,000 to Trimpat plc. The loan bears interest at 12.5% a year. All interest due on the loan has been paid. The loan will be repayable in full by one payment of 400,000 on 31 March 2027. During the year ended 31 March 2018 Systope plc sold inventory to Trimpat plc for 2,440,000. The cost of this inventory tp Systope Ltd was 1,710,000. On 31 March 2018 Trimpat's inventory figure included 500,000 relating to these goods. The original cost of these goods to Systope plc was 350,000. On 31 March 2018 Trimpat plc had outstanding invoices payable to Systope plc of 200,000. Systope plc controls the composition of the board of directors of Trimpat plc Ubart plc Systope plc purchased 40% of the ordinary shares in Ubart plc on 1 April 2016 for 3,110,000. The retained earnings of Ubart plc were 1,040,000 on 1 April 2016. Systope plc is represented on the board of directors of Ubart plc but does not control its composition. During the year ended 31 March 2018 the companies made the following dividend payments: Systope plc Trimpat plc Ubart plc 4 pence per share 5 pence per share 2.5 pence per share Required Page 9 of 17 / TURN OVER NBS8340 a) Prepare the consolidated statement of profit or loss for Systope plc for the year ended 31 March 2018. Show all supporting workings clearly. (21 marks) b) Prepare the consolidated statement of financial position for Systope plc as at 31 March 2018. Show all supporting workings clearly. (30 marks) c) Distinguish between full consolidation and partial consolidation identifying the circumstances where each would be used under current International Financial Reporting Standards and discuss how the use of these consolidation techniques make published financial statements more useful to external users. (9 marks) Total 60 marks