Drafting & Interpretating Financial Statements

Question 1

consolidated statements - goodwill workbox

Answer 1

Consideration (remove any intercompany loans)
Non-controlling interest (at acquisition)
Net assets acquired (Share capital + share premium + revaluation)
Impairment of goodwill (if necessary)

Question 2

SOFP - PPE workbox

Answer 2

Land & Buildings at cost
Land & Buildings acc dep INCLUDING THIS YEAR’S DEP CHARGE
Property equipment at cost
Property equipmet acc dep INCLUDING THIS YEAR’S DEP CHARGE
ADD any revaluation

Question 3

SOFP - Retained Earnings workbox

Answer 3

Retained earnings at start of year
Profit from SOPL (before comprehensive income)
DEDUCT dividends

Question 4

SOFP - Equity section

Answer 4

Share Capital
Share Premium
Revaluation Surplus
Retained Earnings

Question 5

SOFP - Trade receivables workbox

Answer 5

Trade receivables
Prepayments
Irrecoverable debt
Any intercompany balances
Doubtful receivables (if increased DEDUCT)

Question 6

SOFP - Trade payables workbox

Answer 6

Trade payables
Accruals
Accrued adjustments, or accrued interest

Question 7

SOFP - Current Assets

Answer 7

Inventories
Trade receivables
Cash & cash equivalents

Question 8

SOFP - Current Liabilities

Answer 8

Trade and other payables
Tax Liability

Question 9

consolidated statements - retained earnings box

Answer 9

parent retained earnings
post acquistion profit of subsidary (retained earnings at acquisition - retained earnings on statement, work out parent %)
DEDUCT goodwill impairment
DEDUCT unrealised profit

Question 10

consolidated statements - non controlling interest box

Answer 10

total equity sub %
revaluation sub %

Question 11

consolidated statements - inventories unrealised profit

Answer 11

consolidated inventories and DEDUCT unrealised profit

Question 12

consolidated statements - SOPL unrealised profit

Answer 12

revenue - less sale value
cost of sales - less sale value + unrealised profit

Question 13

statement of cash flows - proceeds on disposal box

Answer 13

• carrying amount of disposal of PPE
• profit or (loss) on sale

Question 14

statement of cash flows - purchases of ppe

Answer 14

• PPE carrying amount at beginning of year
• LESS depreciation charge
• LESS carrying amount on disposall
• LESS PPE carrying amount at end of year

Question 15

statement of cash flows - operating activities

Answer 15

Profit before tax (from sopl)
ADD depreciation
DEDUCT dividends received
ADD (DEDUCT) (profit) loss on disposal
ADD finance costs
(increase)/decrease on inventories
(increase)/decrease on receivables
increase/(decrease) on payables
TOTAL
DEDUCT tax
DEDUCT interest

Question 16

statement of cash flows - invensting activities

Answer 16

start with operating profits
ADD sales proceeds of PPE
DEDUCT purchase cost of PPE
ADD dividends received
ADD interest received

Question 17

statement of cash flows - finance activities

Answer 17

ADD proceeds of share issue
DEDUCT liability/loan repayments (ADD increase in loans)
DEDUCT dividends paid

Question 18

consolidated statements - how to work out % if none

Answer 18

number of shares parent aquires / subsidary share capital at acquisition