Umma Ltd. A public company quoted on the Nairobi Stock Exchange, owns 80% of Ugeni Ltd. A public company which is situated in a foreign country, Timoa. The currency of this country is Trim(TR). Umma Ltd. acquired Ugeni Ltd. on 30 April 1999 for Ksh.220 million when the retained profits of Ugeni Ltd. were TR 610 million. Ugeni Ltd. has not issued any shares since acquisition. The following financial statements relate to the two companies.

 

Balance sheet at 31 December 2000
	Umma Ltd Ksh. 'million'	Ugeni Ltd TR 'million'
Fixed   assets:           Tangible assets            Investment in Ugeni Ltd Net current assets: Creditors failing due after one year     Share capital Share premium Profit and loss account	945 270 735 (375) 1,575   330 350   895 1,575	1,890 - 645 (1,115) 1,420   240 80 1,100 1,420
Profit and loss account for the year   ended 31 December 2000
	Umma Ltd Ksh. 'million'	Ugeni Ltd TR 'million'
Turnover Cost of sales Gross profit Administrative and distribution cost Income from Ugeni Ltd. Interest payable Operating profit before tax Taxation Profit on ordinary activities after   tax Dividends paid Retained profits for the year.	1,650 (945) 705 (420) 8 (22) 271 (79) 192 (20) 172	3,060 (2,550) 510 (51) - (102) 357 (153) 204 (52) 152

 

Additional information:

1.          During the year, Ugeni Ltd. sold goods to Umma for TR 104 million and made a profit of TR 26 million on the transaction. All of the goods, which were exchanged on 30 June 2000 remained unsold at the year end. At 31 December 1999 there were goods sold by Ugeni Ltd. to Umma Ltd held in  the stock of Umma Ltd. These goods were valued at Ksh.6 million on which Ugeni Ltd. made a profit of Ksh.2 million.

 

2.          Ugeni Ltd. paid the dividend for the year ended 31 December 2000 on 30 June 2000. No other dividend was proposed for the year. The tax effect has been accounted for and may be ignored.

3.          The fair value of the net assets of Ugeni Ltd. at the date of acquisition was TR 1,040 million. The fair value increment all due to tangible fixed assets has not however been incorporated in the books of Ugeni Ltd.

4.          Goodwill fractuates with changes in the exchange rate.

5.          Tangible fixed assets are depreciated over five years on a straight-line basis with a full year's charge provided in the year of acquisition.

6.          A loan of Ksh.50 million was raised by Ugeni Ltd. from Umma Ltd on 31 May 2000. The loan is interest free and is repayable in 2009. The loan is included in the cost investment in Ugeni Ltd. An amount of TR 65 million had been paid to Umma Ltd on 31 December 2000 in part settlement on the loan. The amount had not been received by Umma Ltd. and had not been included in its financial statements as at 31 December 2000.

7.          The following exchange rates are relevant for translation:

 

Trims (TR) to the K Shilling:
30 April 1999 31 December 1999 1 January 2000 31 May 2000 30 June 2000 31 December 2000 Weighed average for 2000	4.0 4.6 4.7 5.3 5.2 5.0 5.1

 

8.          The functional currency of Ugeni Ltd was different from the presentation currency of the Group (Kshs).

 

Required:

(a).        Consolidated profit and loss account for the year ended 31 December 2000   (11 marks)

(b).       Consolidated balance sheet as at 31 December 2000                                  (10 marks)

(c).        Statement for the movement in consolidated reserves for the year ended 

            31 December 2000                                                                                   (4 marks)

                                                                                                                      (Total: 25 marks)