10 Each share carries one vote and the issued share capital of all the entities

10 each share carries one vote and the issued share

This preview shows page 45 - 48 out of 57 pages.

10. Each share carries one vote and the issued share capital of all the entities in the group remained unchanged since 2 January 20.17.
Image of page 45
46 QUESTION 7 (continued) REQUIRED: a) Discuss the accounting treatment of the following in the consolidated financial statements: (i) loan granted from the investor to the associate; and (5) (ii) management fees paid by the associate to the investor. (6) b) Prepare the following for the Fly Ltd Group for the year ended 31 December 20.17: (i) the consolidated statement of profit or loss and other comprehensive income; and (15) (ii) the consolidated statement of financial position (18) All answers must comply with the requirements of International Financial Reporting Standards (IFRS). All amounts should be rounded to the nearest Rand. Comparative figures and notes to the consolidated financial statements are not required. QUESTION 7 (SUGGESTED SOLUTION) PART A (i) Loan granted to associate Only unrealised transactions are eliminated for associates. This means that only transactions that effect the SPL in one entity and the SFP in the other are eliminated under the equity method. Loans, trade receivables, payables effect the SFP in BOTH entities and are therefore NOT eliminated under the equity method. Interest, accounting fees effect the SPL in BOTH entities and are therefore also NOT eliminated under the equity method. Loans between the investor and an associate and the interest paid (or received) on such loans is not eliminated under the equity method. (ii) Management fees paid by associate to investor Only unrealised transactions are eliminated for associates. This means that only transactions that effect the SPL in one entity and the SFP in the other are eliminated under the equity method. Loans, trade receivables, payables effect the SFP in BOTH entities and are therefore NOT eliminated under the equity method. Interest, accounting fees effect the SPL in BOTH entities and are therefore also NOT eliminated under the equity method. As the management fees paid and received affect only the SPL in the accounting records of both Fly Ltd and By Ltd (‘other income’ and ‘other expenses’, they are realised transactions and are therefore not eliminated under the equity method. The management fees received from the associate will be included in “other income” in the consolidated statement of profit or loss and other comprehensive income (as they will not be eliminated).
Image of page 46
FAC3704/102 47 QUESTION 7 (SUGGESTED SOLUTION)(continued) PART B (i) FLY LTD GROUP CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 20.17 R Revenue Cost of sales 185 500 (88 000) Gross profit Other income (12 980 – 800(2 000 x 40%)) Other expenses Share of profit from associate (23 652(C1) – 400 (J1) + 112 (J1)) 97 500 12 180 (13 000) 23 364 Profit before tax Income tax expense 120 044 (27 294) PROFIT FOR THE YEAR Other comprehensive income for the year 92 750 - TOTAL COMPREHENSIVE INCOME FOR THE YEAR 92 750 (ii) FLY LTD GROUP CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 20.17 ASSETS Non-current assets R Property, plant and equipment Investment in associate (C1) Loan to By Ltd Other investments Deferred tax (5 000 x 25 / 125 x 40% x 28%) 152 000 37 852 18 000 20 000 112
Image of page 47
Image of page 48

You've reached the end of your free preview.

Want to read all 57 pages?

  • Spring '16
  • Balance Sheet, NCI, Generally Accepted Accounting Principles, Sydney Ltd, York Ltd, Crow Ltd

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors