Staverton is a public company with a year end of 31 December 20x6. The company has several subsidiaries.
Requirement
Adjust the spreadsheet for the three transactions listed below. Then compare your answer to the model answer.
| Staverton | Draft CSPLOCI | Adjustment 1 | Adjustment 2 | Adjustment 3 | Final CSPLOCI |
| CSPLOCI | $m | $m | $m | $m | $m |
| CSPL | |||||
| REVENUE | 1,000 | 1,000 | |||
| COST OF SALES | (600) | (600) | |||
| GROSS PROFIT | 400 | 0 | 0 | 0 | 400 |
| OPERATING EXPENSES | (100) | (100) | |||
| PROFIT ON SALE OF SUBSIDIARY | 0 | 0 | |||
| SHARE OF PROFIT OF ASSOCIATE COMPANY | 0 | 0 | |||
| PROFIT BEFORE TAX | 300 | 0 | 0 | 0 | 300 |
| INCOME TAX | (100) | (100) | |||
| DEFERRED TAX | 0 | 0 | |||
| PROFIT AFTER TAX | 200 | 0 | 0 | 0 | 200 |
| OCI | |||||
| REMEASUREMENT DIFFERENCE | 0 | 0 | |||
| REVALUATION OF PPE | 150 | 150 | |||
| DEFERRED TAX | 0 | 0 | |||
| TCI | 350 | 0 | 0 | 0 | 350 |
| PAT ATTRIBUTABLE TO | |||||
| Members of group | 160 | 0 | 0 | 0 | 160 |
| NCI | 40 | 40 | |||
| 200 | 0 | 0 | 0 | 200 | |
| TCI ATTRIBUTABLE TO | |||||
| Members of group | 310 | 0 | 0 | 0 | 310 |
| NCI | 40 | 40 | |||
| 350 | 0 | 0 | 0 | 350 |
Transaction 1
On 1 January 20x6, Staverton sold half of its investment in Nappers Co, a 100% subsidiary. As from that date, it could exercise significant influence (but not control).
The cash proceeds were credited to a suspense account. Nappers Co has been consolidated as a 100% subsidiary for the whole year, but it should have been treated as a 50% associate.
The following figures had been consolidated – revenue $200m, cost of sales $100m, operating expenses $50m. The profit on the sale of the subsidiary was $20m. Nappers Co is not considered to be a discontinued operation. Ignore tax on this transaction.
Transaction 2
Deferred taxation has not been recognized on the following transactions. These transactions were entered into by the parent company.
A provision for reorganization of $50m has been set up. This will not be allowed for tax until the reorganization actually takes place in the following year.
A revaluation upwards of PPE of $150m. Tax rate is 20%.
Transaction 3
The remeasurement gain on the defined benefit pension plan of $50m has been incorrectly credited to cost of sales. However, tax has been correctly accounted for on this transaction.