5.

At January 2021 Alom Ltd held 80% of the ordinary share capital of Shajol Ltd, its sole
subsidiary. On 1 April 2021 Taj Ltd acquired 30% of the ordinary share capital of Kajol
Ltd, giving Alom Ltd significant influence over Kajol Ltd. The profits and losses of Kajol
Ltd accrued evenly over the year ended 31 December 2021.

Extract from the draft financial statements of the three companies for the year ended 31
December 2021 are shown below:

Statement of profit or loss for the year ended 31 December 2021

Amount in Taka
Alom Ltd. Shajol Ltd. Kajol Ltd.
Revenue 1,105,000 864,900 763,200
Cost of sales (353,600) (389,200) (305,300)
Gross profit 751,400 475,700 457,900
Operating expenses (290,400) (98,650) (168,300)
Profit from operations 461,000 377,050 289,600
Investment income 96,000 - -
Profit before tax 557,000 377,050 289,600
Income tax expenses (167,000) (110,000) (85,000)
Profit for the year 390,000 267,050 204,600

Statement of financial position as at 31 December 2021 (extract)

Amount in Taka
Alom Ltd. Shajol Ltd. Kajol Ltd.
Equity
Ordinary share capital (Taka 1 shares) 3,000,000 1,100,000 500,000
Retained earnings 468,400 395,300 276,200
Total equity 3,468,400 1,495,300 776,200

Additional information:
i) Alom Ltd acquired its holding in Shajol Ltd on 1 January 2019. The fair values of all assets and
liabilities of Shajol Ltd at the date of acquisition were the same as their carrying amounts, with the
exception of an intangible asset which was estimated to have a fair value of Taka 10,000 in excess of
its carrying amount.
The intangible asset was assessed as having a remaining useful life of eight years at 1 January 2019.
Amortization of intangible is presented in operating expenses.

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 Shajol Ltd’s retained earnings at the date of acquisition were Taka 160,700. During the current year
Shajol Ltd paid an interim dividend of Taka 50,000. The non-controlling interest and goodwill
arising of the acquisition of Shajol Ltd were both calculated using the proportionate method.
ii) At 1 April 2021, the date of acquisition by Alom Ltd, the fair value of Kajol Ltd’s assets and
liabilities were the same as their carrying amount.
iii) Since 1 April 2021 Kajol Ltd has invoiced Taka 90,000 of sales of Alom Ltd, all at mark-up of 20%.
One quarter of these goods were still in Alom Ltd’s inventories at the year-end.
iv) On 1 January 2021, Alom Ltd sold a machine to Shajol Ltd for Taka 120,000. The machine
had a carrying amount in Alom Ltd’s books of Taka 95,000 at the date of sale. The estimated
remaining useful life of the machine was assessed at the date of sale as five years. Depreciation on
plant and machinery is presented in cost of sales.
v) At 31 December 2021 Shajol Ltd had received Taka 45,000 in deposits from customers to secure the
purchase of its latest electronic game which went on sale on 1 February 2022. Shajol Ltd recognized
the amount in revenue for the year ended 31 December 2021 and deposited the money in a separate
deposit account.
vi) At 31 December 2021 an impairment loss of Taka 15,000 in respect of goodwill arising on the
acquisition of Shajol Ltd was recognised. An impairment loss of Taka 8,000 needs to be recognised
in respect of Alom Ltd’s investment in Kajol Ltd for the year ended 31 December 2021.
Requirements:
a) Prepare a consolidated statement of profit or loss for the year ended 31 December 2021. 10
b) An extract of its consolidated statement of financial position on the same date, presenting all figures that
would appear as part of equity, including the no controlling interest. 15

Answer to the Question# 6 (a):

Consolidated statement of profit or loss
For the year ended 31 December 2021
Taka
Revenue (w2) 1,924,900

Cost of sales (w2)

Gross profit
Operating expenses (W2) Profit from operations
Investment income (W2) 56,000
Sale of share of associates (W7) 36,910

Profit before tax 864,710

Income tax expenses (W2)
Profit for the period

Profit attributable to:

Owners of Alom Ltd (B) 543,550

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 Non-controlling interest (6) 44,160
587,710

Answer to the Question# 6 (b):

Consolidated statement of financial position

At 31 December 2021
Taka
Equity
Share Capital 3,000,000
Retained earnings (W9)

Non-controlling interest
Total equity

Workings:

1. Group structure

Alom Ltd

80% Shajol Ltd Shajol Adjustment Total

30% Kajol Ltd (9 Ltd Taka Taka Taka
months) 864,900 1,924,900
(45,000)
2. Consolidation schedule Total
(389,200)
Taka
(762,800)
1,105,000
(98,650)
(1,250) (390,300)
(353,600)
Revenue (20,000)
Deposit adjustment (40,000) 56,000
(290,400)
Cost of sales-per question
PURP NCA (W5) 96,000
Cost of sales-per question
Fair value adj. (amort) (W3)
Investment income
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 Shajol Ltd’s dividend (50,000 x80%)
Tax (167,000) (277,000)
Profit after tax

3. Fair value adjustment

Additional fair value Taka 10,000

Additional amortization charge in year Taka 10,000 / 8 years = Taka 1,250

4. Unrealized profit

Unrealised profit = Taka 90,000 /120 x 20 x 1/4= Taka 3,750

Alom Ltd’s share of Kajol Ltd’s PURP – Taka 3,750 x 30% = Taka 1,125

5. Unrealized profit on sale of machine

Taka
Carrying amount of the machine in Shajol Ltd’s book at 120,000 x 4/5 96,000
If assets would not transferred, carrying amount would have been Taka (76,000)
95,000 x 4/5
20,000

6. Non-controlling interest

Shajol Ltd;s (20% x (220,800 (W2) Taka 44,160

7. Associates

Taka
Profit for the year (204,600 x 9/12) 153,000

Alom Ltd’s Share x 30% 46,035

PURP (W4) (1,125)
Less: impairment for the year (8,000)
Share of associate’s profit 36,910

8. Shajol Ltd’s retained earnings

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 Taka
At 31 December 2021 395,300
Revenue adjustment (45,000)
FV amortization adjustment (Taka 1,250 x 3 years) (3,750)
At date of acquisition

9. Consolidated retained earnings

Taka
Alom Ltd’s c/fwd 468,400
Less PURP NCA (20,000)
Shajol Ltd’s (80% x 185,850 (W8) 148,680
Less impairment (15,000)
Kajol Ltd (W7) 36,910
618,990

10. No-controlling interest - SFP

Taka
Shajol Ltd
Net assets per question 1,495,300
Revenue adjustment (45,000)
FV amortization adjustment (W8) (3,750)
FV adjustment - Intangible

NCI share x 20% 291,310

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5. The draft statements of the financial position of the three companies on December 31, 2021, are shown
below:

Ghora Ltd. Pupe Ltd. Bisree Ltd.

ASSETS Taka Taka Taka
Non-Current Assets
Property, Plant and Equipment 660,700 635,300 261,600
Intangible Assets 101,300 72,000 -
Investments 350,000 - -
Capital WIP 78,000 3,000 3,500
Right-of-Use Assets 4,500 1,500 4,000
Total Non-Current Assets 1,194,500 711,800 269,100
Current Assets
Inventories 235,400 195,900 65,700
Trade and Other Receivables 174,900 78,800 56,600
Right-of-Use Assets 800 700 500
Advance Deposits & Prepayments Cash 4,500 1,500 4,000
and Cash Equivalents 23,700 25,900 3,400
Total Current Assets 439,300 302,800 130,200
Total Assets 1,633,800 1,014,600 399,300

EQUITY AND LIABILITIES

Equity
Ordinary Share Capital (Tk 1.00 per share) 100,000 500,000 200,000
Revaluation Surplus 125,000 - -
Retained Earnings 1,084,800 312,100 12,000
Total Equity 1,309,800 812,100 212,000

Non-Current Liabilities
Trade and Other Payables Lease 25,500 4,500 5,000
Liabilities 12,000 2,000 2,000
Total Non-Current Liabilities 37,500 6,500 7,000
Current Liabilities
Trade and Other Payables 151,200 101,800 137,400
Lease Liabilities 5,300 700 500
Unearned Revenue 45,000 13,500 4,500
Taxation 85,000 80,000 37,900
Total Current liabilities 286,500 196,000 180,300
Total equity and liabilities 1,633,800 1,014,600 399,300

The following are the additional information:

1) Ghora Ltd. acquired 75% of Pupe Ltd’s ordinary shares on January 01, 2020, for total
cash consideration of Tk. 691,000. Tk. 250,000 was payable on the date of acquisition
and the remaining Tk. 441,000 two years later on January 01, 2022.

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 On the date of acquisition, Pupe Ltd.’s retained earnings were Tk. 206,700. The non-
controlling interest and goodwill arising on the acquisition of Pupe Ltd were calculated
using the proportionate method.
2) The intangible assets in Pupe Ltd’s statement of financial position relate to goodwill
which arises on the acquisition of an unincorporated business, immediately before
Ghora Ltd purchased its share in Pupe Ltd. Cumulative impairment of Tk. 18,000 in
relation to this goodwill had been recognised by Pupe Ltd as of December 31, 2021.
The fair value of the remaining assets, liabilities and contingent liabilities of Pupe Ltd
at the date of their acquisition by Ghora Ltd was equal to their carrying amount with
exception of a building purchased on January 01, 2018, which had a fair value on the
date of acquisition of Tk 120,000. This building is being depreciated by Pupe Ltd on a
straight-line basis for over 50 years and is included in the above statement of financial
position at a carrying amount of Tk. 92,000.
An appropriate discount rate is 5%. At this rate the Present Values of Tk.1.00 are: year-1:
0.952; year-2: 0.907; year-3: 0.864; and year-4: 0.823.
3) Immediately after its acquisition by Ghora Ltd, Pupe Ltd sold a machine to Ghora Ltd.
The machine had been purchased by Pupe Ltd on January 01, 2018, for Tk 10,000 and
was sold to Ghora Ltd for Tk 15,000. The machine was originally assessed as having a
total useful life of five years and that estimate has never changed.
4) Ghora Limited has a partial amount of Capital WIP amounting to BDT 24,500 ready
for use as of Sept 15 2021 which was not re-classified to PPE as accountant thought
the same was not put in use.
5) Bisree Ltd is a joint venture, set up by Ghora Ltd and a fellow venturer on March 31,
2020. Ghora Ltd paid cash of Tk 100,000 for its 40% share of Bisree Ltd.
6) During the current year, Ghora Ltd sold goods to Pupe Ltd for Tk 12,000 and to Bisree
Ltd for Tk 15,000, earning a 20% gross margin on both sales. At the year-end, all of
these goods were still in the inventories of purchasing companies.
7) During the reporting year, Ghora Ltd signed contract construction with Pupe Ltd
whereby Ghora Limited have furnished all ingredients to produce the product and Pupe
Ltd have agreed to produce in line with the design provided by Ghora Ltd against
service charges of BDT 10 per unit of produce. Pupe Ltd has supplied 1.83 lacs units.
The same was not accounted for yet in anyone's books of accounts. Furthermore, the
VAT authority has issued final penalties of BDT 0.95 lacs for noncompliance by Pupe
Ltd in this relation. The same was un-accounted too.
8) Performance obligation against a portion of Un-earned revenue was disputed and
referred to the Arbitrator. The arbitrator made the binding declaration to all involved
parties the following amount as of 30 Sept 2021:
Ghora Limited Pupe Limited Bisree Limited
Amount of performed obligation in BDT 24,400 3,500 25,000
9) On December 31, 2021, Ghora Ltd’s trade receivables included Tk. 50,000 due from
Pupe Ltd.
However, Pupe Ltd’s trade payable included only Tk. 40,000 due to Ghora Ltd. The
difference was due to cash in transit.
10) On December 31, 2021, impairment losses of Tk. 25,000 and Tk. 10,000 respectively
in respect of goodwill arising on the acquisition of Pupe Ltd and the carrying amount

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 of Bisree Ltd. need to be recognised in the consolidated financial statements.
Requirements:
(a) Prepare the consolidated statement of financial position for Ghora Ltd as of December 31, 2021. 21
(b) Briefly explain the single entity concept and the distinction between control and ownership by reference
to the consolidated statement of financial position prepared in above (a) of this question. 4

Answer

Consolidated statement of financial position

BDT BDT
ASSETS
Non-current assets
Property, Plant & Equipments (660,700+635,300 + 24,000 1,340,500
(W1)+24,500-1000 (W1) -3,000 (W1)
Intangible assets (101,300 + 144,475) 245,775
Investment in joint venture (W6) 93,600
Capital CWIP (78,000+3000-24,500) 56,500
Right-of-use assets (4,500+1,500) 6,000
1,742,375
Current assets
Inventories (235,400+195,900-2,400(W5)) 428,900
Trade and other receivables (174,900 +78,800-50,000) 203,700
Right-of-use assets (800+700) 1,500
Advance, deposit & prepayments (4,500+1,500) 6,000
Cash and cash equivalents (23,700+25900+10,000) 59,600
699,700
Total assets 2,442,075

EQUITY AND LIABILITY

Equity attributable to the owners of Ghora Ltd.
Ordinary share capital 100,000
Revaluation surplus 125,000
Retained earnings (W4) 1,028,300

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Total equity 1,419,575

Non-current liabilities
Trade and other payables (25,500 + 4,500) 30,000
Lease liabilities (12,000 + 2,000) 14,000
44,000
Trade and other payables (151,200 + 213,000
101,800-40,000)
Lease liabilities (5,300 + 700) 6,000
Un-earned revenue (45,000+13,500) 58,500
Liability for VAT 95,000
Taxation (85,000+80,000) 165,000
Deferred consideration 441,000
978,500

Total equity & liabilities 2,442,075

Workings:

(1) Net Assets - Pupe Ltd.

Post-acquisition
Year end At acquisition
BDT BDT BDT
Share capital 500,000 500,000 -
Retained earnings - as per question 312,100 206,700 105,400
Less: Intangible assets (72,000) (90,000) 18,000 -
FV adjustment of PPE (120,000- 24,000 24,000
(92,000 x 48/46)
Depreciation thereon (24,000 x 2/48) (1,000) - (1,000)
PURP (W7) (3,000) - (3,000)
760,100 640,700 119,400

Goodwill

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