Advance Corporate Reporting - Accounting and Finance Assignment Help

Assignment Task

Learning Outcomes

On successful completion of this assignment you will be able to:

1. Discuss the professional and ethical duties of the CFO/accountant; evaluate the financial reporting framework.

2. Advise on and report the financial performance of entities.

3. Prepare the financial statements of groups of entities in accordance with relevant accounting standards and Explain reporting issues relating to specialised entities.

4. Critically analyse the implications of changes in accounting regulations on financial reporting.

5. Appraise the financial performance and position of entities and evaluate current developments.

Your Task

Part A

On 1 January 2020, Pear company acquired 80% of Guava company’s share capital for a total value of £250m. Additional information:

•  The fair value of the subsidiary’s net assets on acquisition total £200 million.
•  Assume the fair value of the non-controlling interest (NCI) share at acquisition was £50 million.

Required:

Calculate the NCI and goodwill of the group on 1 January 2020 using the following two NCI methods:

1. Traditional method: NCI’s proportionate share of net assets of the acquire.

2. Full (gross) goodwill method.

Make appropriate references to IFRS.

Part B

The balance sheets of Sigma plc and Omega plc on 31 December 2019, the accounting date for both companies, were as follows:

On 31 December 2019, Sigma plc purchased 100% of Omega plc shares. The purchase consideration was satisfied by the issuance of 6 new equity shares by Sigma plc for every 5 equity shares purchased from Omega plc.

On 31 December 2019, the market value of a Sigma plc share was £2.25 and the market value of an Omega plc share was £2.40.

Further relevant details regarding Omega plc’s accounts on 31 December 2019 are as follows:

• The fixed assets had a fair value of £43.5m.
• The inventory had a fair value of £9.5m.
• The debentures had a market value of £11m.
• Other net assets had a fair value that was the same as their book value.

Note that the effect of the acquisition was not reflected in Sigma plc’s statement above.

Required:

Prepare the consolidated balance sheet of Sigma plc on the acquisition date. Please explain and justify all steps you have taken to prepare the statement and provide details of any assumptions you have made.

Part C

ABC Ltd acquired 70% of XYZ Ltd shares on 31 December 2018 for a cost of £4,000,000. The balance sheets of the two companies on 31 December 2019 and the profit and loss accounts for the year ending 31 December 2019 are as follows:

Additional information:

• A goodwill impairment review has been carried out, and it has been determined that goodwill has been impaired by £300,000 as of 31 December 2019.
• On 31 December 2019, ABC Ltd paid XYZ Ltd £200,000 for intercompany liabilities, but XYZ has not yet recognised this in its accounts.

Required:

1. Define what is meant by purchased goodwill, how it is calculated, and explain the reasons why it might arise.

2. Prepare the consolidated profit and loss account for the group for the year ending 31 December 2019. 3. Prepare the consolidated balance sheet for the group as of 31 December 2019.

4. Show all of your workings, explain the steps you have taken (with reference to IFRS standards), and note any assumptions that you have made.

5. Outline the goodwill impairment review process and examine the current criticisms of its practical implementation.

Part D

Royal Dutch Shell (RDS) is a multinational British-Dutch oil and gas company that is headquartered in the Netherlands. Accordingly, it prepares its final accounts in accordance with IFRS. Obtain the annual report of RDS for the year ending 2016 (available online at www.shell.com) and review the information about its acquisitions. This information may be provided in different parts of the annual report, including financial statements.

List the acquisition(s) made during the year. Prepare a report which shows:

1. Your research into the reasons for success or failure of acquisitions in general.

2. Potential advantages of each of RDS’s acquisition(s) in 2016.

3. The impact of the acquisition(s) on the group’s consolidated financial statements, including the adjustments to the subsidiary’s book values.

4. Express your opinion about the goodwill of the group and the goodwill impairment charges, if any.

Your answer should be supported with references to specific IFRS standards the company followed.

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