Answer Happy

a) Prepare the consolidated statement of financial position and the consolidated income statement for Hill plc for the year ended 31st December 2015, complying, as far as the information permits, with the requirements of IFRS 10 and IFRS 3. Non- controlling interests are to be measured using method 1. Balance Sheets & 30/12/2015 HII € 000's Holt Hesham Consolidated 745.200 318,500 198,400 Non current assets Property, plant, equipment Goodwill investment in subsidiary Investment in associate 1,103,700 44,863 310.000 95.2001 1,150,400 318,500 198,400 106,080 1,254,643 385,800 443.900 Current assets inventories Trade receivables Current account Hoit Current account Hesham Bank 287,100 113,700 72.100 246,300 197,600 76,300 20,400 12,800 146.900| 49.100 12.000 713,500 360,400 160,400 1,863,900 678,900 358,800 12.800 196.000 1,038,500 2.293,143 Total assets 750,000 173,600 138,630 434 413 1,496,643 Equity and reserves Share capital 750,000 250,000 175,000 General Reserve 150.000 50.000 25,000 Non controling interest Retained earnings 379,300 122.100 53.800 Shareholders funds 1,279,300 422,100 253,800 Non current liabilities Loan 200,000 75.000 40,000 Current liabilities Trade payables 284,600 126,400 42,200 Current account HU 20.400 12.800 Dividend payable 100,000 35,000 10,000 384,600 181.800 65.000 Total equity and liabilities 1.863,900678,900 358,800 275,000 411,000 110,500 521.500 2.293,143 10 marks NOTE: Only consolidated column needs to be shown. Consolidated Income Statement ye 31/12/2015 Sales 2.101,400 Cost of sales -1.410,980 Gross profit 690.420 Expenses -282.168 Group profit before taxation 408.252

NOTE: Only consolidated column needs to be shown. Consolidated Income Statement ye 31/12/2015 Sales 2,101,400 Cost of sales -1.410,980 Gross profit 690,420 Expenses 282,168 Group profit before taxation 408,252 Impairment charge -19,227 Share of associated profits 4,740 Profit before tax 393,771 income tax expense -89.950 Profit for the year 303,821 Attributable to: Equity shareholders 283,240 Non controlling interest 20,580 4 marks Cost of acquisition Holt Cost of Y 310,000 Acquired 175.000 Pre acq profit 28.910 Pre agres 14.000 Fair value adjustment 28.000 245,910 Goodwill 64,090 Goodwill impairment 19.227 Goodwill carrying amount 44,863|2 marks General reserve of Holt Balance 50,000 pre a 14.000 Postace 21.000 NCI 30% 15,000 50,000|2 marks Retained earnings Holt Balance 122.100 Preaca 28.910 postaca 56.560 NCI 36.630 122,100 2 marks INCI Holt Net assets Fair value adjustment 126.630 12,000 138,630 2 marks Associate cost Cost Share capital Preaca Generales Hesham 95,200 35.000 2480 2.400

NCI 30% 15,000 50,000/2 marks Retained earnings Holt Balance Preaca Postace NCI 122.100 28,910 56.560 36,630 122,100|2 marks NCI Holt Net assets Fair value adjustment 126.630 12.000 138,63012 marks Associate cost Cost Share capital Preaca Generales Hesham 96.2001 35,000 2.480 2,400 39.880 55,3202 marks Goodwill Carrying amount Cost Post ang profit Generales Hesham 95.200 8.280 2,600 106,080 Retained profits HII 379,300 Share subsid divd 24,500 Associate postace 8.280 56,500 -19,227 impairment Intercompany transaction Total - 15.000 434,4133 marks Intercompany transaction Sales 250.000 Profit markup 50.000 in stock 75,000 Unrealised profit 15.000 1 mark (28 marks)

b) The criteria for determining whether a company should be considered a subsidiary or an associated is detailed within IFRS 10 Consolidated Financial Statements and also in IAS 28 Investments in Associated. A key issue in this determination is the distinction between significant influence and control. You are required to critically evaluate this criteria and evaluate its effectiveness from the perspective of the usefulness of consolidated financial statements. Investor has significant influence, but no control, therefore not a subsidiary Significant influence Over financial and operating policy decisions - Assumed where 20% or more of voting power Subject to evidence to contrary Over financial and operating policy decisions - Representation on board Participation in policy making process - Material transactions Interchange of management personnel -Provision of essential technical information This area is clouded and open to interpretation, so some critical discussion should be evident in the students response