| Subject Code : | BAP32 | Country : | Australia |
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Assignment Task
Instruction for the case study:
You are required to download the financial reports of any two selected companies and identify the required information from the notes on fair value disclosures. You need to compare as to how two companies’ fair value disclosures are made.
In your answer, you need to identify and report on comparative fair value hierarchies and methods used for differing classes of assets by the selected two companies.
Referencing Example:
The page numbers of the respective documents must be included using “Insert footnote” option in Microsoft Words. Please follow the referencing as the example below:
1Discussion in this paragraph is from page 240 of the annual report, Commonwealth bank. 2Discussion in this paragraph is from page 252 of the annual report, ANZ bank.
At this date, all the assets and liabilities of Packman Ltd are sold to Zaba Ltd, with Packman Ltd going into voluntary liquidation. The terms of acquisition are:
(a) Zaba Ltd is to take over all the assets of Packman Ltd, as well as the accounts payable of Packman Ltd.
(b) Costs of liquidation of $700 are to be paid by Packman Ltd with funds supplied by Zaba Ltd. (c) Preference shares in Packman Ltd are to receive two fully paid shares in Zaba Ltd for every three shares held, or alternatively, $0.80 per share in cash payable at the acquisition date. (d) Ordinary shareholders of Packman Ltd are to receive two fully paid ordinary shares in Zaba Ltd for every share held or, alternatively, $2.50 in cash payable half at the acquisition date and half in one year’s time.
(e) Debenture holders of Packman Ltd are to be paid in cash out of funds provided by Zaba Ltd. The debentures have a fair value of $102 per $100 debenture.
(f) All shares issued by Zaba Ltd have a fair value of $1.20 per share.
(g) Costs of issuing and registering the shares issued by Zaba Ltd amount to $80 for the preference shares and $200 for the ordinary shares.
(h) Legal and accounting costs associated with the acquisition of Packman Ltd amount to $2000.
The two parties agree on the terms of the arrangement, and holders of 6 000 preference shares and 10 000 ordinary shares elect to receive cash.
(a) Prepare the acquisition analysis in relation to the above acquisition by Zaba Ltd. (b) Prepare the journal entries in the records of Zaba Ltd at the date of acquisition. (c) Prepare the journal entry for the payment of the deferred consideration in one year’s time.
Case 2: Consolidation worksheet, previously held investment in subsidiary (5%)
On 1 August 2018, ITP Syd Ltd acquired 10% of the shares in Peters Ltd for $8000. ITP Syd Ltd used the fair value method to measure this investment with movements in fair value being recognised in profit or loss. At 1 July 2017, the fair value of this investment was $15 400. The original investment
in Peters Ltd was due to the fact that Peters Ltd was undertaking research into particular microbiological elements that could influence the profitability of ITP Syd Ltd. With the continuing success of this research, ITP Syd Ltd decided to acquire the remaining shares (cum div.) in Peters Ltd.
On 1 July 2017, ITP Syd Ltd made an offer to buy the remaining shares in Peters Ltd for $151 000 cash. This offer was accepted by the shareholders of Peters Ltd. On 1 July 2017, immediately after the business combination, the statement of financial position of Peters Ltd was as follows:
The plant and equipment is expected to have a further 4-year life and is depreciated on a straight line basis. The inventory was all sold by 30 June 2018.
Peters Ltd had expensed all the outlays on research and development. ITP Syd Ltd placed a fair value of $12 000 on this asset. Peters Ltd also had reported a contingent liability at 30 June 2017 in relation to claims by customers for damaged goods. ITP Syd Ltd placed a fair value of $3000 on these claims. The research and development is amortised evenly over a 10-year period. The claims by customers were settled in May 2018 for $2800.
The company tax rate is 30%.
Required
(a) Prepare the consolidated financial statements of ITP Syd Ltd at 1 July 2017, immediately after the business combination.
(b) Prepare the consolidation worksheet entries at 30 June 2018.
Case 3: Intragroup transactions (5%)
Ammi Ltd owns all of the shares of VStone Ltd. In relation to the following intragroup transactions, all parts of which are independent unless specified, prepare the consolidation worksheet adjusting entries for preparation of the consolidated financial statements as at 30 June 2019. Assume an income tax rate of 30%.
(a) On 1 January 2018, Ammi Ltd sold inventory costing $6000 to VStone Ltd at a transfer price of $9000. On 1 September 2018, VStone Ltd sold half these items of inventory back to Ammi Ltd, receiving $3000 from Ammi Ltd. Of the remaining inventory kept by VStone Ltd, half was sold in January 2019 to Goanna Ltd at a loss of $200.
(b) On 1 January 2019, VStone Ltd sold an item of plant to Ammi Ltd for $2000. Immediately before the sale, VStone Ltd had the item of plant on its accounts for $3000. VStone Ltd depreciated items at 5% p.a. on the diminishing balance and Ammi Ltd used the straight-line method over 10 years.
(c) On 1 July 2018, Ammi Ltd sold a motor vehicle to VStone Ltd for $12 000. This had a carrying amount to Ammi Ltd of $9600. Both entities depreciate motor vehicles at a rate of 10% p.a. on cost.
(d) During the 2017–18 period, Ammi Ltd sold inventory to VStone Ltd for $9000, recording a before-tax profit of $1800. Half this inventory was unsold by VStone Ltd at 30 June 2018. (e) VStone Ltd sells second-hand machinery. Ammi Ltd sold one of its depreciable assets (original cost $80 000, accumulated depreciation $64 000) to VStone Ltd for $10 000 on 1 January 2019. VStone Ltd had not resold the item by 30 June 2019.
(f) On 1 May 2019, VStone Ltd sold inventory costing $300 to Ammi Ltd for $380 on credit. On 30 June 2019, only half of these goods had been sold by Ammi Ltd, but Ammi Ltd had paid $280 back to VStone Ltd.
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