ICAN 2025 Corporate Reporting | Mixed

(i) Any impairment on goodwill has been included in the draft financial statements for the year ended December 31, 2023.

(ii) There was no disposal of property, plant and equipment during the year. Depreciation charged for the period was N120 million.

(iii) It was established that there was no actuarial gain or loss in the year.

(iv) Included in dividends paid during the year was N800 million paid to Waterside Plc, a subsidiary company through which Breakthrough Plc conducts its investment activities. The transfer was made on January 1, 2023 for specified portfolio of investments but no transfer of profit or loss occurred. Ninety-five percent of the profits and one hundred per cent of the losses in the specified portfolio of investments are to be transferred to Breakthrough Plc at the end of the year annually and the capital is expected to be returned in four years’ time.

(v) Breakthrough Plc is yet to make provision for its seventy per cent acquisition and holding in Dandy Plc on January 1, 2022. However, the company wants to set up a provision for reconstruction costs of N20 million retrospectively on the acquisition. The fair values of the net assets acquired were as follows: Property, plant and equipment N140,000; Inventories and work in progress N180,000; Total N320,000. The purchase consideration was N200 million in cash and N50 million (discounted value) deferred consideration payable on January 1, 2023. The difference between the discounted value of the deferred consideration (N50 million) and the amount payable (N58 million) is included in interest expense.

(vi) The composition of current liabilities, non-current liabilities and retirement benefit liability are as presented below.

(i) Uzor Limited revalued its property, plant and equipment (PPE) for the first time on January 1, 2021. The property, plant and equipment of Gombe Ltd are very similar in age and type to that of Uzor Limited. Gombe Limited has a policy of maintaining all its property, plant and equipment at depreciated historical costs, using 20% rate on straight line basis. Both Gombe Limited and Uzor Limited charge depreciation on PPE to cost of sales. Uzor Limited has transferred the excess depreciation on the re-valued assets from revaluation reserve to retained earnings.

(ii) On December 31, 2021 Gombe Limited supplied goods at the normal selling price of N9,600,000 to another Company Mamagold Limited. Gombe Limited’s normal selling price is at a mark up of 60% on costs. Mamagold Limited paid for the goods in cash on the same day. The terms of the selling agreement were that Gombe Limited repurchase these goods on June 30, 2022 for N10,000,000. Gombe Limited accounted for this transaction as sales for the year ended December 31, 2021.

(iii) It is the practice of Kakanfo Group Plc to appraise potential investment opportunities by making use of the following ratios: - Gearing; - Turnover to capital employed; - Gross profit margin; and - Return on capital employed.

(iv) After the computation in (iii) above, the Senior Accountant concluded that performance of Gombe Limited is better than that of Uzor Limited. Therefore, Kankanfo Group Plc should carry out due diligence on Gombe Limited with a view to making a bid to acquire it.