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- December 17, 2020 at 10:00 am #600180
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 Exhibit1.
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:
Assignment 2
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)Assignment 3
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 relates to 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
1 January 20X7 Rs
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 Rs700 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 near future of Rs10 million.
• Other than the items above the only other temporary differences are for financial assets and liabilities. Their tax base is as follows:
Financial asset Rs’m
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.
?December 17, 2020 at 4:27 pm #600196I am afraid this service is to help with the odd technical query for the SBR exam, not to solve entire questions.
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