关键词 > M17EFA/7049EFA

M17EFA/7049EFA Financial Statement Analysis

发布时间：2022-06-28

Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: daixieit

M17EFA/7049EFA Financial Statement Analysis

Question 1 (30 marks)

Part (a)

The following are the summarised statements of financial position for Green Energy Plc and Eco Ltd at 31 March 2021, the end of their most recent accounting years:

Statements of financial position at 31 March 2021

Green

Energy Plc

Eco

Ltd

Non-current assets

£m

Property, plant and equipment

7,000

800

Investments

- 160m ordinary shares in Eco Ltd

800

- £100m £1 5% debentures in Eco Ltd

100

Current assets

Inventory

170

Receivables

180

Cash and cash equivalent

130

132

8,380

1032

Equity and reserves

Ordinary £1 shares

2,000

300

Share premium account

2,100

200

Retained earnings

3,080

240

Non-current liabilities

10% Debentures

800

195

Current liabilities

Payables

250

Owed to Eco Ltd

Bank overdraft

106

8,380

1032

The following information is also available:

On 1 April 2020 Green Energy Plc acquired share capital in Eco Ltd. At that date the retained earnings of Eco Ltd amounted to £80m. Each ordinary share in Eco Ltd carries one vote and there are no voting rights other than those attached to the ordinary shares. Eco Ltd has not issued any shares since its acquisition by Green Energy Plc.

On 1 April 2020 the fair value of Eco Ltd’s property, plant and equipment was £150m higher than book value. This adjustment has not been reflected in the statement of financial position on the previous page. No further adjustments are necessary for depreciation during the year ended 31 March 2021

At 31 March 2021 Green Energy Plc’s inventory includes £50m relating to goods purchased from Eco Ltd. These goods had cost Eco Ltd £35m.

· Requirement for question 1(a)

(i)

Calculate goodwill arising on the acquisition of Eco Ltd at 1 April 2020.

(4 marks)

(ii)

Calculate consolidated retained earnings at 31 March 2021.

(3 marks)

(iii)

Calculate the non-controlling interest at 31 March 2021.

(3 marks)

(iv)

Prepare a consolidated statement of financial position for Green Energy Plc at 31 March 2021.

(6 marks)

(v)

Explain with supporting calculations how your answers above would differ if a review at 31 March 2021 established impairment of goodwill amounting to £12m. (Note that you do not need to re-produce the entire consolidated statement of financial position)

(3 marks)

(vi)

With reference to IAS 38 and / or IFRS 3, explain how the business would treat non-purchased (or internally generated) goodwill in its financial statements. Is it possible at some future date for Green Energy Plc to revalue upwards the goodwill in (i) above?

(3 marks)

Note: Round all numbers to nearest £million (i.e. no decimal places)

Part (b)

Define the concept of control in a group structure and discuss (with relevant examples) three more ways a parent company can exercise control over a subsidiary.

(Marks will be awarded for making reference to relevant accounting standards)

(8 marks)

Total 30 Marks

Question 2 (35 marks)

Maxish is a medium sized listed manufacturing company in the UK. Up to 2019, the company’s profitability had declined by more than 10% year on year from 2015. Other than a decrease in profitability, the company’s share price was also on a free fall three years to 2019. In 2019 Annual General Meeting, the shareholders were concerned about the future of the company. In the beginning of 2020, the board of directors recruited Mr Pete as the operations director. Mr Pete has several years of experience and is known to turn around companies. Mr Pete noted that his focus will be lean manufacturing. He also noted that the company was labour intensive and there was need to shift the strategy. Following this, Mr Pete, invested in heavy technology so that the company can reduce the labour cost. The total cost of investment was £6,000,000. The company also decided to cut down the prices by 10% so that the products can be competitive. The capital investment was funded by borrowing from a leading financial institution. The company is now conducting a post investment review and would like to assess how the company has performed.