Additional Information
First issue: Gongon Group has three investment properties in its books. Investment properties are measured in the financial statements at fair value (as permitted under IAS 40 - Investment properties), while owner occupied properties are measured at cost less accumulated depreciation and impairment losses. The properties are currently presented at 2019 year end valuations. No adjustments have been made for the current year. During the year 2020, there was a change of use of two of Gongon Group investment properties. Property ‘A’ a commercial warehouse located at Apapa that has been let on a commercial basis for a number of years, was re-assigned as office space for the company. The tenants were notified and vacated the premises on May 1, 2020. The property was valued at N8,000,000 on January 1, 2020, N7,600,000 on May 1, 2020, and N7,400,000 on Dec. 31, 2020. It is the company policy to depreciate owner-occupied property at a rate of 2% per annum on a monthly basis. Property ‘B’ was acquired in year 2014 for N10,000,000 and is valued at N9,000,000 on January 1, 2020. In late 2020, resulting from falling property prices in the country, the director agreed to dispose of this property. The property was empty since September and was put on the market in October with an asking price of N8,800,000. Although there has been some interest in the property, no firm offer had been made by the year end. Estimates of disposal costs are about N600,000. The value remained at N8,800,000 at December 31, 2020. Property ‘C’ is valued at N18,500,000 at December, 2018.
The summarised financial statement of Gongon PLC and the two other companies are as follow: Draft Statements of financial position at December 31, 2020 Gongon PLC Bandel Limited Osune Limited Assets: Non-current assets: N’000 N’000 N’000 Property, plant and equipment (PPE) 120,000 55,800 15,000 Investment: Shares in Bandel Limited 40,000 -- -- Shares in Osune Limited 30,000 -- -- Investment properties 32,000 -- -- 222,000 55,800 15,000 Current assets: 171,400 24,000 16,000 Total assets 393,400 79,800 31,000 Equity and liabilities Equity 330,000 24,600 24,000 Other non-current liabilities 21,000 -- Current liabilities 42,400 55,200 7,000 Total equity and liabilities 393,400 79,800 31,000 Extract of draft statement of profit or loss and other comprehensive income for the year ended December 31, 2020 Gongon PLC Bandel Limited Osune Limited N’000 N’000 N’000 Profit before tax 80,000 6,000 5,000 Income tax expense (6,600) (660) (400) Profit for the year 73,400 5,340 4,600
Second Issue: On January 1, 2020 Gongon commenced a defined benefit plan for a number of head office employees. Under the pension scheme. Gongon PLC has an obligation to provide these staff with agreed post-employment benefit. Gongon PLC carries out the actuarial and investment risk assessments associated with the pension scheme. The following is the draft details of the scheme: Information on Gongon’s Pension Scheme N’000 Interest income on plan assets 330 Employers contribution to plan 11,000 Current service cost 12,000 Interest on plan liability 360 Fair value of plan assets as at 31/12/2020 11,600 Present value of plan obligation at 31/12/2020 12,400 The Chief Accountant of the Gongon PLC was not sure which accounting standard to apply when accounting for pension scheme. The only adjustment made to account for the scheme was to expense the company’s contribution of N11million for the 2020 financial year in the statement of profit or loss and other comprehensive income and to credit the cash account.