The Assignment Project

The board of directors of RAYSUT CEMENT and OMAN CEMENT are negotiating a potential merger. To facilitate the process, you have been consulted to help the companies in determining their fair values and prepare the consolidated financial reports.

You believe the book values are equal to fair values of identifiable assets except for property, plant and equipment, in which 20% is lower than expected. Goodwill can be found by the allocation of difference between book value and implied value of Oman Cement after accounting for property plant and equipment variance.

Assumptions:

a. Book values are equal to fair values for all assets and liabilities except for property, plant and equipment. The Property Plant and Equipment should be closed in the allocation of difference between book value and implied value.

B. Instructions:

1. Download the Profit and Loss statement and the Financial Position for Oman Cement for the year 2018 from MSM.

2. Assume that RAYSUT CEMENT will pay 300,000,000 OMR to acquire 70% of OMAN CEMENT.

3. Record the investment transaction and the necessary elimination entries.

4. Prepare consolidated financial statements (Financial Position and Profit and Loss) at the time of acquisition. Assume the date of acquisition is on the last time financial statements were prepared i.e., 31/12/2018

Oman Cement Company SAOG Financial statements for the year ended 31 December 2018 Statement of profit or loss and other comprehensive income 2018 RO Notes 2017 RO NCOME Revenue Cost of sales 23 24 50,809,483 (39,717,396) 57,548,487 (42,744,980) Gross profit 11,092,087 14,803,507 EXPENSES General and administration 26 (4,101,222) (3,939,451) Operating profit Other income Net finance income Net investment income 25 28 30 6,990,865 473,685 577,178 330,079 10,864,056 415,991 713,566 826,313 Profit before taxation Taxation 8,371,807 (1,057,204) 12,819,926 (3,228,073) 20 Profit for the year 7,314,603 9,591,853 Other comprehensive income for the year: Potentially reclassifiable to the income statement Fair value change in investments at FVOCI Not reclassifiable to income statement Fair value change in investments at FVOOI Other comprehensive income for the year (2,749,409) 8 (c) 2,447,677) (2,447,677) 4,866,926 0.022 (2,749,409) 6,842,444 0.029 Total comprehensive income for the year Basic earnings per share 22 (b) Oman Cement Company SAOG Financial statements for the year ended 31 December 201 Statement of financial position 0 ASSETS Non-current assets Property, plant and equipment Intangible assets RO 121,370,419 1,018,967 115,732,785 34,560 5 7 Investments at fair value through other comprehensive income Investment at amortized cost Bank deposits Total non-current assets 11,242,560 10,473,121 143,909,167 9,857,121 11,290,831 9,500,000 153,111,354 Current assets Investments at fair value through profito loss Inventories Accounts and other receivables Cash and bank balances Bank deposits Total current assets 5,440,169 23,133,243 8,288,287 3,995,393 1,000,000 41,857,092 5,719,101 20,020,646 8,152,363 3,707,303 8,000,000 45,599,413 10 13 Total assets 85,766,259 198,710,767 EQUITY AND LIABILITIES Share capital Share premium Legal reserve Voluntary reserve Fair value reserve Retained eanin 33,087,271 6,724,145 11,029,090 16,543,635 867,421 87,541,090 155,792,652 33,087,271 6,724,145 1,029,090 16,543,635 3,871,547 89624,224 60,879,912 15 Liabilities Non-current liabilities Non-current portion of term loans Employees end of service benefits Deferred tax liabilit Total non-current liabilities 7,367,749 1,007,914 7,509,392 15,885,055 2,659,787 1,142,462 7.426,271 21 228,520 20 Current liabilities Accounts and other payables Current portion of term loans Taxation Total current liabilities 7,526,472 7,650,329 1425,534 16 602 335 19 7,696,749 5,291,253 1,100,560 14,088,552 20 Total liabillties Total equity and liabilities Net assets per share 29,973,607 37,830,855 186,766,259 98,710,767 These financial statements were approved and authorized for issue by the Board of Directors on 24 February 2019 and signed on their behalf by: Salim Abdullah Al Hajri Chief Executive Officer ah Abbas Ahmed e attached notes 1 to 35 form part of these financial statements. Oman Cement Company SAOG Financial statements for the year ended 31 December 2018 Statement of profit or loss and other comprehensive income 2018 RO Notes 2017 RO NCOME Revenue Cost of sales 23 24 50,809,483 (39,717,396) 57,548,487 (42,744,980) Gross profit 11,092,087 14,803,507 EXPENSES General and administration 26 (4,101,222) (3,939,451) Operating profit Other income Net finance income Net investment income 25 28 30 6,990,865 473,685 577,178 330,079 10,864,056 415,991 713,566 826,313 Profit before taxation Taxation 8,371,807 (1,057,204) 12,819,926 (3,228,073) 20 Profit for the year 7,314,603 9,591,853 Other comprehensive income for the year: Potentially reclassifiable to the income statement Fair value change in investments at FVOCI Not reclassifiable to income statement Fair value change in investments at FVOOI Other comprehensive income for the year (2,749,409) 8 (c) 2,447,677) (2,447,677) 4,866,926 0.022 (2,749,409) 6,842,444 0.029 Total comprehensive income for the year Basic earnings per share 22 (b) Oman Cement Company SAOG Financial statements for the year ended 31 December 201 Statement of financial position 0 ASSETS Non-current assets Property, plant and equipment Intangible assets RO 121,370,419 1,018,967 115,732,785 34,560 5 7 Investments at fair value through other comprehensive income Investment at amortized cost Bank deposits Total non-current assets 11,242,560 10,473,121 143,909,167 9,857,121 11,290,831 9,500,000 153,111,354 Current assets Investments at fair value through profito loss Inventories Accounts and other receivables Cash and bank balances Bank deposits Total current assets 5,440,169 23,133,243 8,288,287 3,995,393 1,000,000 41,857,092 5,719,101 20,020,646 8,152,363 3,707,303 8,000,000 45,599,413 10 13 Total assets 85,766,259 198,710,767 EQUITY AND LIABILITIES Share capital Share premium Legal reserve Voluntary reserve Fair value reserve Retained eanin 33,087,271 6,724,145 11,029,090 16,543,635 867,421 87,541,090 155,792,652 33,087,271 6,724,145 1,029,090 16,543,635 3,871,547 89624,224 60,879,912 15 Liabilities Non-current liabilities Non-current portion of term loans Employees end of service benefits Deferred tax liabilit Total non-current liabilities 7,367,749 1,007,914 7,509,392 15,885,055 2,659,787 1,142,462 7.426,271 21 228,520 20 Current liabilities Accounts and other payables Current portion of term loans Taxation Total current liabilities 7,526,472 7,650,329 1425,534 16 602 335 19 7,696,749 5,291,253 1,100,560 14,088,552 20 Total liabillties Total equity and liabilities Net assets per share 29,973,607 37,830,855 186,766,259 98,710,767 These financial statements were approved and authorized for issue by the Board of Directors on 24 February 2019 and signed on their behalf by: Salim Abdullah Al Hajri Chief Executive Officer ah Abbas Ahmed e attached notes 1 to 35 form part of these financial statements