You work as a group financial consultant for the ABC Group. You have been asked to prepare a redrafted consolidated statement of financial position at 31 December 20x7. Related information / instructions is presented in Exhibit 1. Consolidated statement of financial position is presented in Exhibit 2 that needs to be redrafted after incorporating information given in Exhibit 1. It is likely that the audited Financial Statements will be ready to be laid in the annual general meeting scheduled on 15 June 20x8. Requirements: 1. Prepare a note that explains treatments of information given in Exhibit 1. (13 marks) 2. Prepare the journal that will be required when the share options are exercised. Assume that the actual leavers are the same as the estimated. (2 marks) 3. Prepare a Corrected Consolidated Statement of Financial Position at 31 December 20X7 (after incorporating all required adjustments). (10 marks) Exhibit 1 - All subsidiaries are wholly owned. A revaluation of Rs8 million for property, plant and equipment has not yet been accounted and the directors have indicated that they have no intention of selling this property, so no tax will be payable. Property, plant and equipment for has a tax base of Rs52.8 million Other intangible assets relate to development costs which were incurred during the year. The tax department has advised that tax relief has been claimed on all of the costs incurred Provisions relatesto a legal claim. The tax department has advised that this is not allowable for tax until the amounts are paid. Goodwill is not allowable for tax purposes in this jurisdiction. A late consolidation adjustment for an unrealised profit of Rs5 million has yet to be accounted for. The profit arose on the sale of goods from the subsidiary to the parent company. On 1 January 20X7, ABC Group granted 1,000 share options to each of its 20 managers. The managers have to remain in employment for two years and the share price of ABC Group needs to increase by 10% over the two year period. Each option will allow the manager to buy five shares in ABC Group. It was initially thought that only two managers would leave over the vesting period but by the year end, three managers had already left and a further one manager is expected to leave before the vesting date. No amounts were accounted for at the grant date. To exercise the share options the managers will need to pay Rs200 The fair value of each share option was as follows: Year Fair value of option Rs 1 January 20X7 800 31 December 20X7 950 Local tax law allows a tax deduction at the exercise date of the intrinsic value of the options. The intrinsic value of the share options was R$700 at the year end. No adjustments have been made for the share options. A subsidiary made taxable losses of Rs15 million during the year and the tax rules allow taxable losses to be carried forward. The budgets for the subsidiary show that they will make taxable profits in the ne ar future of R$10 million. Otherthan the items above the only other temporary differences are for financial assets and liabilities. Their tax base is as follows: B&.00 Financial asset 198 Trade receivables 165 Assume taxation is payable at 30% and ignore any impact on current tax. The deferred tax liability in the draft consolidated statement of financial position is last year's deferred tax liability. ABC Group's share capital has a nominal value of Rs100. Exhibit 2-Corsolidated Statement of Financial Position I Needs to be redrafted) SELO Assets Non-current assets: Property, plant and Equipment Goodwill Other intangible assets Financial asets 132 110 281 743 154 Current assets Trade receivables Inventory Cash and cash equivalents 101.2 147.4 402.6 1,145.6 Total asets Equity and liabilities Equity Share capital Other components of equity 198 132 Retained earnings 200.86 Total equity 530.86 220 79.2 Non-current liabilities Long-term borrowings Deferred tax liability Defined benefit plan Liability Provisions Total non-current liabilities 88 50 437.2 67.54 Current liabilities Current tax liability Trade and other payables Total current liabilities 110 177.54 614.74 Total liabilities Total equity and liabilities 1.145.6 614.74 Total liabilities Total equity and liabilities 1.145.6 You work as a group financial consultant for the ABC Group. You have been asked to prepare a redrafted consolidated statement of financial position at 31 December 20x7. Related information / instructions is presented in Exhibit 1. Consolidated statement of financial position is presented in Exhibit 2 that needs to be redrafted after incorporating information given in Exhibit 1. It is likely that the audited Financial Statements will be ready to be laid in the annual general meeting scheduled on 15 June 20x8. Requirements: 1. Prepare a note that explains treatments of information given in Exhibit 1. (13 marks) 2. Prepare the journal that will be required when the share options are exercised. Assume that the actual leavers are the same as the estimated. (2 marks) 3. Prepare a Corrected Consolidated Statement of Financial Position at 31 December 20X7 (after incorporating all required adjustments). (10 marks) Exhibit 1 - All subsidiaries are wholly owned. A revaluation of Rs8 million for property, plant and equipment has not yet been accounted and the directors have indicated that they have no intention of selling this property, so no tax will be payable. Property, plant and equipment for has a tax base of Rs52.8 million Other intangible assets relate to development costs which were incurred during the year. The tax department has advised that tax relief has been claimed on all of the costs incurred Provisions relatesto a legal claim. The tax department has advised that this is not allowable for tax until the amounts are paid. Goodwill is not allowable for tax purposes in this jurisdiction. A late consolidation adjustment for an unrealised profit of Rs5 million has yet to be accounted for. The profit arose on the sale of goods from the subsidiary to the parent company. On 1 January 20X7, ABC Group granted 1,000 share options to each of its 20 managers. The managers have to remain in employment for two years and the share price of ABC Group needs to increase by 10% over the two year period. Each option will allow the manager to buy five shares in ABC Group. It was initially thought that only two managers would leave over the vesting period but by the year end, three managers had already left and a further one manager is expected to leave before the vesting date. No amounts were accounted for at the grant date. To exercise the share options the managers will need to pay Rs200 The fair value of each share option was as follows: Year Fair value of option Rs 1 January 20X7 800 31 December 20X7 950 Local tax law allows a tax deduction at the exercise date of the intrinsic value of the options. The intrinsic value of the share options was R$700 at the year end. No adjustments have been made for the share options. A subsidiary made taxable losses of Rs15 million during the year and the tax rules allow taxable losses to be carried forward. The budgets for the subsidiary show that they will make taxable profits in the ne ar future of R$10 million. Otherthan the items above the only other temporary differences are for financial assets and liabilities. Their tax base is as follows: B&.00 Financial asset 198 Trade receivables 165 Assume taxation is payable at 30% and ignore any impact on current tax. The deferred tax liability in the draft consolidated statement of financial position is last year's deferred tax liability. ABC Group's share capital has a nominal value of Rs100. Exhibit 2-Corsolidated Statement of Financial Position I Needs to be redrafted) SELO Assets Non-current assets: Property, plant and Equipment Goodwill Other intangible assets Financial asets 132 110 281 743 154 Current assets Trade receivables Inventory Cash and cash equivalents 101.2 147.4 402.6 1,145.6 Total asets Equity and liabilities Equity Share capital Other components of equity 198 132 Retained earnings 200.86 Total equity 530.86 220 79.2 Non-current liabilities Long-term borrowings Deferred tax liability Defined benefit plan Liability Provisions Total non-current liabilities 88 50 437.2 67.54 Current liabilities Current tax liability Trade and other payables Total current liabilities 110 177.54 614.74 Total liabilities Total equity and liabilities 1.145.6 614.74 Total liabilities Total equity and liabilities 1.145.6