The Apple group consist of the parent company, Apple Ltd and its subsidiary companies, Blue Ltd and Colt Ltd.

Statement of financial position as at 28 February 2022

Apple Ltd

Blue Ltd

Colt Ltd

N$'000

N$'000

N$'000

1,200,000

Non-current assets

Property plant and equipment Investments in Blue - at cost

Investments in Colt - at cost

3,295,000

1,675,000

150,000

Current assets

Inventories Accounts receivable

Bank

450,000

335,000

261,000

TOTAL ASSETS

6,655,000

2,861,000

1,350,000

Equity and liabilities

Share Capital N$2 shares Other components of equity

Retained earnings

850,000

3,340,000 250,000

1,020,000

980,000

80,000

350,000

40,000

Non-current liabilities

Long-term loan

1,895,000

675,000

Current liabilities

Accounts payable Bank overdraft

320,000

106,000

120,000

40,000

TOTAL EQUITY AND LIABILITIES

6,655,000

2,861,000

1,350,000

Acquisition of Blue Ltd

On 1 March 2019, Apple acquired 30% of the ordinary shares of Blue for a cash consideration of N$600 million when the fair value of Blue's identifiable net assets was N$1,840 million. Apple treated Blue as an associate and has equity accounted for Blue up to 1 March 2021. Apple's share of Blue's undistributed profit amounted to N$90 million and its share of a revaluation gain amounted to N$10 million. On 1 March 2021, Apple acquired a further 40% of the ordinary shares of Blue for a cash consideration of N$975 million and gained control of the company. The cash consideration has been added to the equity accounted balance for Blue at 1 March 2021 to give the carrying amount at 28 February 2022.

At 1 March 2021, the fair value of the equity interest in Blue held by Apple before the business combination was N$705 million and the fair value of the non-controlling interest of 30% was assessed as N$620 million. The retained earnings and other components of equity of Blue at 1 March 2021 were N$900 million and N$70 million respectively. It is group policy to measure the non-controlling interest at fair value. A non-depreciable land in the books of Blue was undervalued by 266 million on 1 March 2021.

At the time of the business combination with Blue, Apple had included in the fair value of Blue's identifiable net assets, an unrecognized contingent liability of N$6 million in respect of a warranty claim in progress against Blue. In June 2021, there was a revision of the estimate of the liability to N$5 million. The amount has met the criteria to be recognized as a provision in current liabilities in the financial statements of Blue and the revision of the estimate is deemed to be a measurement period adjustment.

Apple had commissioned an independent valuation of a building of Blue which was not complete at 1 March 2021 and therefore not considered in the fair value of the identifiable net assets at the acquisition date. The valuations were received on 1 July 2021 and resulted in a decrease of N$40 million in the fair value of property, plant and equipment at the date of acquisition. This decrease does not affect the fair value of the non-controlling interest at acquisition and has not been entered into the financial statements of Blue. Buildings are depreciated on the straight-line basis and it is group policy to leave revaluation gains on disposal in equity. The building had a remaining useful life of 20 years at 1 March 2021

Acquisition of Colt Ltd

On 1 March 2021, Apple acquired 80% of the equity interests of Colt, a private entity, in exchange for the following consideration:

Cash payment of N$300 million

Transfer of a building to previous shareholders. The carrying amount of the building at

1 March 2021 was N$200 million while as the fair value fair value was N$250 million. Apple will pay an additional N$181.5 million to the previous shareholders after 2 years. Because the former shareholders of Colt needed to dispose of the investment quickly, they did not have sufficient time to market the investment to many potential buyers. The fair value of the identifiable net assets was N$960 million. Apple determined that the fair value of the 20% non-controlling interest in Colt at that date was N$250 million. Apple reviewed the procedures used to identify and measure the assets acquired and liabilities assumed and to measure the fair value of both the non-controlling interest and the consideration transferred. After that review, Colt determined that the procedures and resulting measures were appropriate. The retained earnings and other components of equity of Colt at 1 March 2021 were N$300 million and N$40 million respectively. The excess in fair value is due to an unrecognized franchise right, which Apple had granted to Colt on 1 March 2013 for five years. At the time of the acquisition, the franchise right could be sold for its market price. Additional information

Ignore tax

Assume an appropriate discount rate of 10%

It is the policy of Apple Group to measure the non-controlling interest at their fair value. All goodwill arising on acquisitions has been impairment tested with no impairment being required.

REQUIRED:

Marks

a)

Define joint arrangement and explain the two types of joint arrangements.

b)

Provide the consolidation the consolidated statement of financial position for the Apple Group for the year ended 28 February 2022.