Totnes 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.
Transaction 1
During the year, Totnes purchased an associate for cash and paid a dividend to NCI. The total of both amounts was shown as the purchase of an associate in error. NCI in the opening and closing CSFP was $500m and $600m respectively. The NCI share of PAT was $200m, and the NCI share of TCI was $250m.
Transaction 2
A gain on the revaluation of an investment property of $200m has been credited to other components of equity in error.
Transaction 3
A new defined benefit pension plan has been incorrectly treated. The draft financial statements show an expense in the profit and loss account of $20m, which represents contributions paid. The service cost was actually $25m. The net interest cost was not material. The remeasurement difference was $8m.
| A | B | C | D | E | F | |
|---|---|---|---|---|---|---|
| 1 | Totnes | Draft CCF | Adjustment 1 | Adjustment 2 | Adjustment 3 | Final CCF |
| 2 | CCF | $m | $m | $m | $m | $m |
| 3 | ||||||
| 4 | OPERATING | |||||
| 5 | Operating profit | 60 | 60 | |||
| 6 | Pension service cost | 0 | 0 | |||
| 7 | Depreciation | 200 | 200 | |||
| 8 | Impairment of goodwill | 640 | 640 | |||
| 9 | Increase in inventory | (500) | (500) | |||
| 10 | Increase in payables | 400 | 400 | |||
| 11 | Pension contributions paid | 0 | ||||
| 12 | Tax paid | (150) | (150) | |||
| 13 | 650 | 0 | 0 | 0 | 650 | |
| 14 | ||||||
| 15 | INVESTING | |||||
| 16 | Purchase of PPE | (300) | (300) | |||
| 17 | Purchase of associate | (700) | (700) | |||
| 18 | Purchase of subsidiary | 0 | 0 | |||
| 19 | (1,000) | 0 | 0 | 0 | (1,000) | |
| 20 | ||||||
| 21 | FINANCING | |||||
| 22 | Dividends to NCI | 0 | ||||
| 23 | Dividends paid | (200) | (200) | |||
| 24 | (200) | 0 | 0 | 0 | (200) | |
| 25 | ||||||
| 26 | CHANGE IN CASH | (550) | 0 | 0 | 0 | (550) |
| 27 | CASH AT START OF YEAR | 1,500 | 1,500 | |||
| 28 | CASH AT END OF YEAR | 950 | 0 | 0 | 0 | 950 |
| TRANSACTION 1 — Dividend to NCI | ||
| NCI per SFP: brought down | 500 | |
| NCI share of total comprehensive income | 250 | |
| Dividend paid to NCI (cash) | (150) | Balancing figure |
| NCI per SFP: carried down | 600 | |
| TRANSACTION 2 | ||
| No impact on the cash flow statement | A revaluation is not a cash movement, and the gain went to OCI — not operating profit | |
| TRANSACTION 3 | ||
| Profit before tax | Decreased by 5 to reflect the true service cost | |
| Operating cash flows | Increased by 25 — the service cost is non-cash | |
| Operating cash flows | Decreased by 20 — the contributions paid are cash |