Question 3
ICAN
•
2025
•
FINANCIAL REPORTING
•
mixed
Case Stimulus
Mana Plc agreed to pay N432 million apart from an immediate payment of N3.50 per share in cash. It is only the cash consideration that was recorded by Mana Plc. The statement of financial position of the two companies as at December 31, 2023 are as follows:
Mana Plc Bakus Plc
N’m N’m
Non-current assets:
Property, plant and equipment 1,680 1,280
Development costs - 160
Investments 1,200 80
Current assets 532 364
Total assets 3,412 1,884
Equity and liabilities:
Ordinary shares of N1.00 each 1,080 320
Share premium 320 160
Revaluation reserve 180 -
Retained earnings - January 1, 2023 640 536
- December 31, 2023 760 1,400 304 840
2,980 1,320
Non-current liabilities
10% inter-company loan notes - 240
Current liabilities 432 324
Total equity and liabilities 3,412 1,884
Mana Plc acquired 75% of Bakus Plc ordinary shares on January 1, 2023.
Additional Information
(i) The cost of capital in respect of deferred consideration is 8% per annum.
(ii) The development project of Bakus Plc was completed on June 30, 2023. The cost is N200 million and as at December 31, 2023, N40 million out of this amount had been amortised. As at the date of acquisition, Bakus Plc had capitalised development cost worth N72 million. The management of Mana Plc examined the development cost of Bakus Plc and concluded that it does not meet the requirement for the recognition of an asset in accordance with IAS 38 -Intangible Asset.
(iii) Non-controlling interest is valued by Mana Plc using fair value at the date of acquisition. The fair value of non-controlling interest at the acquisition date was N332 million. As at December 31, 2023, the impairment test concluded that it should be reduced by N80 million.
(iv) Mana Plc applied fair value method in revaluing land and building. The land and building of Bakus Plc had a fair value of N80 million higher than the book value at the date of acquisition and this also increased by another N16 million as at December 31, 2023 (additional depreciation is not necessary).
(v) A product with the brand name “Agric-equip” was owned by Bakus Plc and was not included in its statement of financial position. The product was valued by specialists to be N160 million. It has an estimated life of 10 years as at January 1, 2023.
(vi) A loan of N240 million made to Bakus Plc at the date of acquisition was included in Mana‟s investment. Interest is payable in arrears annually. An interest due for the year, December 31, 2023 was paid by Bakus Plc, but it was not recorded by Mana Plc because it was received after the year end.
(vii) During the year, Mana Plc bought goods from Bakus at a profit of N24 million. As at December 31, 2023, one-third of these items were part of the inventory.
Requirements
(
a
)
Calculate: Non-controlling interest.
(
b
)
Calculate: Goodwill.
(
c
)
Calculate: Consolidated reserves for share premium, revaluation reserve and retained earnings.
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About This Question
This is
Ican
2025
Financial Reporting
Question 3.
It is one of the
mixed
questions from the
2025
Ican
Financial Reporting
examination.