The Balance Sheets, as at 31 December 2019, of three entities, P S and A are produced below.

P acquired 80% of the shares in S on 31 December 2018 at a cost of Rs65,000 and 25% of the share capital of company A on the same date at a cost of Rs15,000. P controls S and exercises significant influence over A.

At the time of acquisition, Ss profits stood at Rs15,000 and an item of PPE in the books of S was undervalued by Rs10,000. This item of PPE had a remaining useful life of 5 years at date of acquisition. At the time of acquisition, As profits stood at Rs15,000 and the net assets of A at that date were deemed to reflect fair values.

Goodwill in S is deemed to have been impaired by 20% since date of acquisition. The fair value of non-controlling interest at 31 December 2018 was Rs20,000. There was no impairment in the investment in the associate.

During the year ended 2019, S sold goods to P for Rs20,000 and P still has 50% of the goods in stock at balance sheet date. S applies a margin of 25% on all sales.

REQUIRED

(a) Prepare Consolidated Statement of financial position at 31 December 2019. (25 marks)

(b) Discuss the recognition criteria under the purchase method of consolidation. (10 marks)

c) Explain the circumstances where control still exists even when the parent

company owns half or less than one half of the voting power. (5 marks)

PSA Rs'000 Rs'000 Rs'000 Non-current assets PPE Investment in Associate Current assets Ordinary share capital Accumulated profits Current liabilities 60 80 45 185 100 65 20 185 45 0 65 110 45 30 35 110 45 0 20 65 25 20 20 65