ACCA P2 (INT) Corporate Reporting - Study text

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Answers

Non‐currentliabilities:

Loans(10,000+9,091)

19,091

Currentliabilities:

Bankoverdraft(6,100+3,455) 9,555

Tradepayables(7,900+4727) 12,627

22,182

69,319

(b) Translation: Income statement of Stockpot for year ended 31 March Year 4

EU000 Rate $000

Revenue

60,000 2.3 26,087

Costofsales (30,000) 2.3 (13,043)

Grossprofit

30,000

13,044

Operatingexpenses (16,000) 2.3 (6,957)

Operatingprofit

14,000

6,087

Interestpayable (2,000) 2.3 (870)

Profitbeforetax

12,000

5,217

Tax (4,200) 2.3 (1,826)

Profitaftertax

7,800

3,391

The income statement has been translated at the average rate as an

approximation to the actual (historical) rate. The closing rate is not allowed

under IAS 21.

Mancaster Group:

Consolidated income statement for the year ended 31 March Year 4

$000

Revenue(50,000+26,087) 76,087

Costofsales(25,000+13,043) (38,043)

Grossprofit

38,044

Operatingexpenses(15,000+6,957) (21,957)

Operatingprofit

16,087

Interestpayable(1,000+870) (1,870)

Profitbeforetax

14,217

Tax(3,600+1,826) (5,426)

Profitaftertax

8,791

Attributableto 

Equityholdersoftheparent 7,943

Non‐controllinginterest(25%×3,391)–seetranslation

848

8,791

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Workings

(1) Goodwill at date of acquisition

$000 Rate EU000

Costofinvestment

5,500 ×3 16,500

Minus:Shareofnetassetsacquired:

Sharecapital(translatedat3.0) 5,000

Accumulatedprofits(translatedat3.0) 1,667

6,667

Groupshare(75%) 5,000 ×3 (15,000)

Goodwill 500

1,500

Re‐statedtoclosingrate:(1,500/2.2) 682

Translationgainongoodwill–togroupreserves 182

(2) Consolidated accumulated profits

$000

Mancaster:

12,500

Stockpot:groupshareofpost‐acquisitionprofits (75%×4,697)–see

translationofstatementoffinancialposition

3,523

Translationgainongoodwill

182

16,205

(3) Non-controlling interest

$000

Non‐controllingshareofnetassetsat31MarchYear4:(25%×

11,364)–seetranslationofStockpotstatementoffinancialposition

2,841

14 Statement of cash flows

Part A

(a) Direct method

Cashflowsfromoperatingactivities

$000

Cashreceiptsfromcustomers

15,424

Cashpaidtosuppliers (5,824)

Cashpaidtoandonbehalfofemployees

(2,200)

Otheroperatingcashpayments

(511)

Cashgeneratedfromoperations

6,889

Answers

(b) Indirect method

Cashflowsfromoperatingactivities

$000

Profitbeforetaxation

6,022

Adjustmentsfor: 

Depreciation

899

6,921

Increaseintradeandotherreceivables (72)

Increaseininventories

(194)

Increaseintradepayables

234

Cashgeneratedfromoperations

6,889

Part B



Item

Operating

activities

Investing

activities

Financing

activities

Cashpaymenttobuysharesinanassociate

√

Cashproceedsfromthesaleofintangible

assets

√

Incometaxrepaymentsreceived √

Paymentofpatentroyalties √

Repaymentsoffinanceleaseobligations

√

Cashpaymentstoacquireproperty,plant

andequipment

√

Dividendincomereceived

√

Interestpaid √

Part C

$000

Netassetsacquired:



Cash 10

Inventories

30

Tangiblenoncurrentassets

50

90

Non‐controllinginterest(10%×90) (9)

81

Purchasedgoodwill(balancingfigure) 34

Fairvalueofnetassetsacquired(totalconsiderationpaid)

115

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Satisfiedby: 

Issueofshares

60

Cashpaid

55

Purchaseconsideration

115

The cash flow shown in the group statement of cash flows as an investing activity

will be an outflow of $45,000. This represents the cash paid as consideration of

$55,000 minus the cash within the subsidiary on acquisition of $10,000.

15 Bella

Statement of cash flows for the year ended 31 March Year 6

$000 $000

Cashflowsfromoperatingactivities



Profitbeforetaxation 4,617 

Adjustmentsfor:



Depreciation(Working1)

300 

Lossondisposalofnon‐currentasset(800–700)

100 

Interestexpense

60 

–

–––––––––––––––––––––––––––––––––

5,077 

Increaseininventories(280–100)

(180) 

Decreaseintradeandotherreceivables(1,350–1,290)

60 

Increaseintradepayables(430–275)

155 

–

–––––––––––––––––––––––––––––––––

Cashgeneratedfromoperations 5,112 

Interestpaid(Working3)

(45) 

Incometaxespaid(Working4)

(185) 

–

–––––––––––––––––––––––––––––––––

Netcashfromoperatingactivities

4,882

Cashflowsfrominvestingactivities



Purchaseofproperty,plantandequipment

(6,000) 

Proceedsfromthesaleofproperty,plantandequipment

700 

Purchaseofintangibleassets(800–300) (500) 

–

–––––––––––––––––––––––––––––––––

Netcashusedininvestingactivities

(5,800)

Cashflowsfromfinancingactivities



Proceedsfromtheissueofsharecapital(Working2)

865 

Issueoflong‐termloan(600–500)

100 

Dividendspaid

(350) 

–

–––––––––––––––––––––––––––––––––

Netcashinflowfromfinancingactivities

615

 –––––––––––––––––––––––––––––––

–

––

Netdecreaseincashandcashequivalents

(303)

Cashandcashequivalentsatthebeginningoftheperiod

45

 –––––––––––––––––––––––––––––––

–

––

Cashandcashequivalentsattheendoftheperiod(55–313) (258)

 –––––––––––––––––––––––––––––––

–

––

Answers

Workings

(1) Property, plant and equipment (PPE)

$000

PPEatnetbookvalue(NBV)atendofyear

12,900

PPEatNBVatbeginningofyear 8,000

DisposalsduringtheyearatNBV (800)

(7,200)

5,700

Depreciationchargefortheyear(balancingfigure)

300

PPEacquiredduringtheyear

6,000

(2) Share capital and premium

Share

capital

Share

premium

Total

$000 $000 $000

Atendofyear 1,900 95 1,995

Atbeginningofyear

1,100 30 (1,130)

Cashreceiptsfromshareissue

865

(3) Interest payable

$000

Accruedinterestatbeginningofyear

Interestchargeinprofitandloss 60

Accruedinterestatendofyear (40)

Interestpaymentsintheyear

(4) Current tax payable

$000

Taxpayableatbeginningofyear

325

Taxchargeinprofitandloss 400

725

Taxpayableatendofyear (540)

Taxpaymentsintheyear

185

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16 Bishop Group

(a)

Statementofcashflowsforyearended31DecemberYear2

$000 $000

Cashflowsfromoperatingactivites(Note1)

2,282

Interestpaid(120+205)

(325)

Dividendsreceived

90

Taxationpaid(W2)

(117)

 ––––––––––––––––––––––––––––––––––

Netcashflowsfromoperatingactivities

1,930



Cashflowsfrominvestingactivities:



Paymentstoacquiretangiblenon‐currentassets(W3)

(4,996) 

Receiptsfromsaleoftangiblenon‐currentassets

810 

Purchaseofinvestments

(300) 

––––––––––––––––––––––––––––––––––

Netcashusedininvestingactivities

(4,486)



Cashflowsfromfinancingactivities:



Proceedsofshareissue

3,824 

Additionalloans(1,200–800–25)

375 

Capitalpaymentsunderfinanceleases(W4)

(150) 

DividendspaidtoNCI(W1)

(295) 

Equitydividendspaid

(600) 

––––––––––––––––––––––––––––––––––

Netcashprovidedbyfinancingactivities

3,154

 ––––––––––––––––––––––––––––––––––

Netincreaseincashandcashequivalents

598

Effectofexchangeratemovements

53

 ––––––––––––––––––––––––––––––––––

651



Cashandcashequivalentsb/fwd

169

 ––––––––––––––––––––––––––––––––––

Cashandcashequivalentsc/fwd

820

 ––––––––––––––––––––––––––––––––––

Answers

Notes to the statement of cash flows

Reconciliation of operating profit to net cash inflow from operating activities

$000

Operatingprofit

2,849

Depreciation 1,200

Profitonsaleofnon‐currentassets(810–720)

(90)

Increaseininventories(6,135 –5,740–117)

(278)

Increaseinreceivables(5,720–4,380–339)

(1,001)

Decreaseinpayables(1,420–1,760–58)

(398)

Netcashflowsfromoperatingactivities

2,282

Workings

(1)

Non‐controllinginterest

$000

DividendpaidtoNCI 295

Balanceb/fwd 2,500

Balancec/fwd 2,800

Incomestatement 420

Exchangegain(20%×875)

175

3,095

(2)

Tax

$000

Taxpaid 117

B/fwdcurrenttax 167

C/fwdcurrenttax 700

B/fwddeferredtax 400

C/fwddeferredtax 550

Incomestatement 800

1,367

(3) Non-current assets

$

OpeningNBV

7,520

Depreciation (1,200)

DisposalsatNBV

(720)

Newfinanceleases

700

Exchangerategains

424

Purchaseforcash

4,996

ClosingNBV

11,720

PaperP2: Corporate reporting (International)

(4)

Obligationsunderfinanceleases

$000

Cashpaid 355

Balanceb/f<1year 50

Balancec/f<1year 110

Balanceb/f>1year 250

Balancec/f>1year 740

Financechargeinprofitorloss 205

Noncurrentassetadditions 700

1,205

The payment of $355,000 is split as $205,000 interest and $150,000 capital as

payments are made in arrears and hence the year end payment pays off the

year’s finance cost.

(b) The income statement and statement of financial position are based on the

accruals concept whereas the statement of cash flows is based on the cash

concept. Cash is the 'life blood' of the company and is therefore critical to an

entity’s survival. Without cash to pay suppliers, the work force and other

payables, the company will cease to operate, irrespective of how profitable it

is.

Shareholders need to know that a company is viable and has the resources to

continue, and perhaps expand, operations. Suppliers need to know they will

be paid and customers need to know the company is in a position to continue

operations.

Profit may be significantly affected by the choice of accounting policies made

by a company. This means it is more subjective than cash and more open to

manipulation. However, the statement of cash flows itself may be subject to

window dressing, for example by delaying payment of suppliers until after

year end. The auditor needs to be involved in this respect to ensure the

shareholders and other users receive meaningful information.

The statement of cash flows gives additional information not provided by the

other financial statements.

17 The Grape Group

Group statement of cash flows for the year ended 31

March Year 4.

$000 $000

Cashflowsfromoperatingactivities



Netprofitbeforetaxation

9,550

Adjustmentsfor:



Depreciation(Note1)

1,176

Lossonsaleofassets

18

Incomefromassociate

(139)

Interestexpense

552

Operatingprofitbeforeworkingcapitalchanges

11,157

Answers

Increaseininventories(1,127 –139)

(988)

Increaseinreceivables(273–85)

(188)

Increaseinpayables(203–68)

135

Cashgeneratedfromoperations

10,116

Interestpaid

(552)

Incometaxespaid(W3)

(2,400)

Netcashfromoperatingactivities

7,164

Cash flows from investing activities

Acquisitionofsubsidiarynetofcashacquired(346–3)

(343)

Purchaseofproperty,plantandequipment(1,875–315)

(1,560)

Proceedsfromsaleofproperty,plantandequipment(W1)

156

Dividendsreceivedfromassociate(W2)

93

Netcashusedininvestingactivities

(1,654)

Cash flows from financing activities

Proceedsfromissuanceofsharecapital(675+519‐152)

1,042

Repaymentofloannotes

(990)

Dividendspaid

(2,100)

Netcashusedinfinancingactivities

(2,048)

Netincreaseincashandcashequivalent 3,462

Cashandcashequivalentsatbeginningofperiod

1,728

Cashandcashequivalentsatendofperiod

5,190

Notes to the statement of cash flows

(1) Major non-cash transactions

During the year the group purchased a subsidiary undertaking. Part of the

consideration for the acquisition was in the form of shares. Further details of

the acquisition are given below.

PaperP2: Corporate reporting (International)

(2) Purchase of subsidiary undertaking

$000

Netassetsacquired:



Property,plantandequipment 315

Inventories

139

Receivables

85

Cashatbankandinhand

3

Payables

(68)

474

Goodwill 24

498

Satisfiedby: 

Sharesallotted 152

Cash

346

498

Workings

(1) Proceeds from sale of property, plant and equipment

$000

Costofassetssold

429

Accumulateddepreciation (255)

Lossonsale

(18)

Proceeds

156

(2) Dividends received from associated undertaking

Interestinassociatedundertakings

$000

$000

Balanceb/d 1,920

Dividendsreceivedfrom

associates

93

Shareofassociatesʹprofitaftertax 139

Balancec/d 1,966

2,059

2,059

ACCA P2 (INT) Corporate Reporting - Study text - 2010 (Emile Woolf)

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