B407F week 12 (student)

B407F week 12 (student) - B407F Advanced Financial...

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1 B407F Advanced Financial Reporting and analysis I The Effects of Changes in Foreign Exchange Rates Illustration 1 A Ltd acquired 80% of the ordinary share of S Ltd, an overseas company, when the retained profit of S Ltd was 30,000 Patus (“P”). At that date the rate of exchange was P4 = $1. S Ltd’s non-current assets were subsequently acquired when the exchange rate was P3.5 = $1 and dividend paid at the exchange rate P2.4 = $1. 12,000 Patus goodwill arising on consolidation was considered impaired and charged to income statement at the beginning of Year 1. Rate of exchange during Year 1 were: Opening 4.0 Average 2.7 Closing 2.4 The functional currency and presentation currency of A Ltd is $. Consolidated Income Statement for the year ended 31 December Year 1 A Ltd S Ltd Rate S Ltd Consolidation $’000 P’000 $’000 Sales 3,274.0 1,210.0 448.1 3,722.1 Cost of sales (2,652.0) (949.0) (351.5) (3003.5) Gross profits 622.0 261.0 96.6 718.6 Depreciation (140.0) (70.0) (25.9) (165.9) Distribution and administration expenses (160.0) (80.0) (29.6) (189.6) Impairment on goodwill (4) 3 (3) Dividend Income from S Ltd. 5.4 - (3)5.4 Profit before taxation 327.4
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B407F week 12 (student) - B407F Advanced Financial...

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