ICAN 2021 Corporate Reporting | Mixed

Feedme Limited is a company that has been in operations for over two decades producing “Trobomao” a natural cocoa powder beverage, produced from cocoa beans. Five years ago, the company acquired 100% interest in Butane Nigeria Limited a company that specialises in the importation of cocoa beans from Cote d‟ivoire. In 2016, Feedme Limited acquired 40% interest in a competitor company: Food Co. limited and on January 1, 2019 it acquired 75% interest in Shawama Supermarket Limited. The draft consolidated financial statements of Feedme Limited group are as follows: Draft consolidated statement of financial position as at December 31, 2019 Year 2018 2019 N‟000 N‟000 N‟000 N‟000 Assets Non-current assets: Freehold buildings at carrying amount 33,000 31,125 Plant and equipment – (Cost) 21,000 45,000 Accm. depreciation (16,500) (18,000) 4,500 27,000 37,500 58,125 Goodwill -- 1,500 Investment in associates 15,000 16,500 Financial assets 6,150 6,150 58,650 82,275 Current assets: Inventories 15,000 29,625 Trade receivables 19,125 27,750 Cash and cash equivalents 27,300 67,725 61,425 125,100 120,075 207,375 Equity and liabilities: Equity Ordinary share capital at 25k 30,000 59,100 Share premium account 31,425 43,245 Retained earnings 37,500 51,675 Total equity 98,925 154,020 Non-controlling interests -- 1,725 Non-current liabilities: Lease obligation 2,350 10,650 Loan notes 7,500 21,900 Deferred tax 395 450 10,245 33,000 Current liabilities: Trade payables 4,200 7,500 Lease obligation 3,000 3,600 Income tax 3,255 6,930 Accrued interest and finance charges 450 600 10,905 18,630 120,075 207,375 Draft consolidated statement of profit or loss and other comprehensive income for the year ended December 31, 2019 N’000 N’000 Revenue 130,650 Cost of sales (108,375) Gross profit 22,275 Share of associates profit after tax 5,250 Income from financial assets 3,000 Interest expense (2,250) Profit before taxation 28,275 Income tax expense (5,865) -- Deferred tax (1,560) Tax attributable to investment income (675) (8,100) Profit for the year attributable to: 20,175 Owner of the parent 18,675 Non-controlling interest 1,500 20,175 Additional information: i. There had been no acquisition or disposal of freehold buildings during the year. ii. Information relating to the acquisition of Shawama Supermarket Limited is as follows: N‟000 Plant and equipment 2,475 Inventories 480 Trade receivables 420 Cash and cash equivalents 1,680 Trade payables (1,020) Income tax (255) 3,780 Non-controlling interests (945) 2,835 Goodwill 1,500 4,335 2,640,000 shares issued as part consideration 4,125 Balance of consideration paid in cash 210 4,335 iii. Loan notes were issued at a discount in 2019 and the carrying amount of the loan as at December 31, 2019 included N600,000 representing the finance cost attributable to the discount and allocated in respect of the current reporting period.

The Chief Executive Officer (CEO) of Agege Plc. has forwarded the draft financial statements of Somolu Limited through an e-mail to you as the company‟s financial consultants. In the e-mail, the CEO informed you that Agege Plc. is planning to acquire Somolu Limited. Somolu Limited is a private limited company that has recently applied for additional funds which was rejected from its current bankers on the basis that the company has insufficient assets to offer as security.

Fair value is a market based measurement not an entity - specific measurement. It focuses on assets and liabilities and on exit (selling) price. It also takes into account market conditions at the measurement date. In other words, fair value measurement look at the amount for which the holders of an asset could sell it and the amount which the holder of a liability would have to pay to transfer it.

International Accounting Standard (IAS) 37 on Provisions, Contingent Liabilities and Contingent Assets sets out the principles of accounting for these items. The inappropriate use of provisions had been an area where companies had been accused of manipulating financial statements and engaging in creative accounting.

Awa Publish has just recently acquired 18% of the shareholding in Tunbe, making it the second largest single shareholder. The majority shareholder has 58% voting shares, while the remainder of the shares is held by ten other shareholders with none holding more than 5% voting shares. The board of directors of Tunbe is made up of 12 members with Awa Publish having 3 members and the majority shareholder having 7 members. Awa Publish was able to negotiate its representation on the board due to its strategic importance in Tunbe operations and expansion plans. The directors of Awa Publish accounted for its investment in Tunbe as an equity investment. The directors feel that Tunbe should not be accounted for as an associate, because Awa Publish does not have 20% of the voting interest and thus does not exercise significant influence over Tunbe.