Ican 2026 Strategic Business Reporting Question 1

NaijaTel Plc acquired 30% of Royal Networks Limited on January 1, 2023 for N4.5billion when the fair value of Royal Networks’ net assets was N15billion. On July 1, 2024, NaijaTel Plc acquired a further 50% stake in Royal Networks Limited, thereby obtaining control. The fair value of NaijaTel’s pre-existing 30% interest at the acquisition date was N6.5billion. The non-controlling interest (NCI) was measured at a fair value of N5.5billion. Deferred consideration of N2billion is payable on June 30, 2025 (discount rate 10%). Royal Networks Limited owns 100% of ConnectNow Limited, a regional subsidiary based in Northern Nigeria. The group reporting date is December 31, 2024 and the presentation currency is the Nigerian Naira (N). Extract of statement of profit or loss for the year ended December 31, 2024 NaijaTel Plc (N’m) Royal Networks Limited (N’m) ConnectNow Limited (N’m) Revenue 40,000 20,000 8,000 Cost of sales (25,000) (12,000) (4,800) Gross profit 15,000 8,000 3,200 Operating expenses (6,000) (3,500) (1,400) Operating profit 9,000 4,500 1,800 Finance costs (1,200) (800) (300) Profit before tax 7,800 3,700 1,500 Income tax expense (2,400) (1,100) (500) Profit for the year 5,400 2,600 1,000