ACCT 1A Lecture Notes - Lecture 23: Comprehensive Income, Equity Method, Financial Statement

11 views2 pages

amaranthgrasshopper262

14 Sep 2020

School

Irvine Valley College

Department

Accounting

Course

ACCT 1A

Professor

Bradshaw

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Statement of profit or loss and other comprehensive income. Other comprehensive income aka the statement of comprehensive income. Comprehensive income change in equity during the period other than changes associated with transaction with owners in their capacity as owners. Broken down into profit or loss and other comprehensive income. Other comprehensive income other items of income and expense that are not required or permitted to be recognised in p/l. Gains or losses on translation of foreign financial statements. List of what is required to be included in the statement of p/l and other comprehensive income disclosures: the equity method. Gains and losses related to reclassification or derecognition of financial assets. Shares of net profits or losses of associates and joint ventures accounted for using. Profits or loss attributable to non-controlling interests and owners of the parent. Comprehensive income for the period being the total profit or loss and other.

Related Questions

QUESTION 1 30 MARKS The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd: Statement of financial position as at 31 December 2018 Mega Ltd Ultra Ltd ASSETS Property, plant and equipment 270 000 340 000 Investment in Ultra Ltd: 48 000 shares at fair value 350 000 - (cost: N$ 330 000) Trade receivables 80 000 23 500 Inventories 350 000 218 000 Bank 65 000 - Total assets 1 115 000 581 500 EQUITY AND LIABILITIES Share capital 400 000 240 000 Mark-to-market reserve 20 000 10 000 Retained earnings 375 000 240 000 Long-term borrowings 43 000 21 000 Trade and other payables 277 000 23 500 Bank overdraft - 47 000 Total equity and liabilities 1 115 000 581 500 Statement of profit or loss and other comprehensive income for the year ended 31 December 2018 Mega Ltd Ultra Ltd Revenue 927 000 1 628 000 Cost of sales -472 000 -725 000 Gross profit 455 000 903 000 Other expenses -287 100 -472 000 Dividend received from Ultra Ltd 94 000 - Profit before tax 261 900 431 000 Income tax expense -198 000 -128 000 Profit for the year 63 900 303 000 Other comprehensive income Items that will not be reclassified to profit or loss Mark-to-market reserve 4 000 1 000 TOTAL COMPREHENSIVE INCOME FOR THE YEAR 67 900 304 000 Extract from the Statement of changes in equity for the year ended 31 December 2018 Mark-to-market reserve Retained earnings Mega Ltd Ultra Ltd Mega Ltd Ultra Ltd Balance at 1 Jan 2018 15 000 8 000 215 000 170 000 Changes in equity for 2018 Total comprehensive income for the year: Profit for the year 63 900 303 000 Other comprehensive income for the year 4 000 1 000 Dividends -108 000 -120 000 Balance at 31 December 2018 19 000 9 000 170 900 353 000 Additional information: On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of: Share capital N$ 260 000 Mark-to-market reserve N$ 3 000 Revaluation reserve N$ 7 000 Retained earnings N$ 135 000 Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interestâs share was N$8,50 per share, based on market prices. Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications. REQUIRED Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks

QUESTION 1 30 MARKS

The following information represents the abridged financial statements of Mega Ltd and its subsidiary Ultra Ltd:

Statement of financial position as at 31 December 2018
	Mega Ltd	Ultra Ltd
ASSETS
Property, plant and equipment	270 000	340 000
Investment in Ultra Ltd: 48 000 shares at fair value	350 000	-
(cost: N$ 330 000)
Trade receivables	80 000	23 500
Inventories	350 000	218 000
Bank	65 000	-

Total assets	1 115 000	581 500

EQUITY AND LIABILITIES
Share capital	400 000	240 000
Mark-to-market reserve	20 000	10 000
Retained earnings	375 000	240 000
Long-term borrowings	43 000	21 000
Trade and other payables	277 000	23 500
Bank overdraft	-	47 000

Total equity and liabilities	1 115 000	581 500

Statement of profit or loss and other comprehensive income for the year ended
31 December 2018
	Mega Ltd	Ultra Ltd
Revenue	927 000	1 628 000
Cost of sales	-472 000	-725 000
Gross profit	455 000	903 000
Other expenses	-287 100	-472 000
Dividend received from Ultra Ltd	94 000	-

Profit before tax	261 900	431 000
Income tax expense	-198 000	-128 000
Profit for the year	63 900	303 000

Other comprehensive income
Items that will not be reclassified to profit or loss
Mark-to-market reserve	4 000	1 000

TOTAL COMPREHENSIVE INCOME FOR THE YEAR	67 900	304 000

Extract from the Statement of changes in equity for the year ended 31 December 2018

	Mark-to-market reserve		Retained earnings
	Mega Ltd	Ultra Ltd	Mega Ltd	Ultra Ltd
Balance at 1 Jan 2018	15 000	8 000	215 000	170 000
Changes in equity for 2018
Total comprehensive income for the year:
Profit for the year			63 900	303 000
Other comprehensive income for the year	4 000	1 000
Dividends			-108 000	-120 000

Balance at 31 December 2018	19 000	9 000	170 900	353 000

Additional information:

On 1 January 2018, the date on which Ultra Ltd acquired the interest in Mega Ltd, the equity of Mega Ltd consisted of:

Share capital N$ 260 000

Mark-to-market reserve N$ 3 000

Revaluation reserve N$ 7 000

Retained earnings N$ 135 000

Ultra Ltd elected to measure non-controlling interests at fair value at the acquisition date. On 1 January 2018, the fair value of each non-controlling interestâs share was N$8,50 per share, based on market prices.

Ultra Ltd classified the investment in Ultra Ltd under IFRS 9 in its separate financial statements and recognised fair value adjustments in a mark-to-market reserve (other comprehensive income). Ignore tax implications.

REQUIRED

Prepare consolidated financial statements for the Mega Ltd Group for the reporting period ended 31 December 2018. (30 marks

Common Size Income statement
	2017		2016
	$M	Percentage	$M	Percentage
Operating revenue	2319	100%	2375	100%
Operating expenses	-1666	-71.84%	-1725	-72.63%
Earnings before interest, tax, depreciation, amortisation,changes in fair value of hedges and other signifcant items(EBITDAF)	653	28.16%	650	27.37%
Depreciation and amortisation	-264	-11.38%	-236	-9.94%
Impairment of assets	-10	-0.43%	-4	-0.17%
Loss on sale of assets	-4	-0.17%	-1	-0.04%
Net change in fair value of electricity and other hedges	-76	-3.28%	-15	-0.63%
Operating profit	299	12.89%	402	16.93%
Finance Cost	79	3.41%	80	3.37%
Interest Income	2	0.09%	2	0.08%
Net change in fair value of treasury instruments	55	2.37%	-68	-2.86%
Net profit before tax	277	11.94%	256	10.78%
Income tax expense	-80	-3.45%	-71	-2.99%
Net proft after tax attributed to the shareholders of the parentcompany	197	8.50%	185	7.79%
Earnings per share (EPS) attributed to ordinary equityholders of the parent	cents		cents
Basic and diluted earnings per share	7.7	0.33%	7.2	0.30%

COMPREHENSIVE INCOME STATEMENT

2017

2016

Percentage

Net profit after tax

197

8.50%

185

7.79%

Other comprehensive income

Intems that will not be reclassifed to profit or loss

Asset revaluation

428

18.46%

889

37.43%

Defferred tax on the above item

-120

-5.17%

-248

-10.44%

Items that may be reclassified to profit or loss

308

641

Net gain on cash flow hedges

0.09%

Exchange differences arising from translation of foreignoperation

0.04%

-23

-0.97%

Income tax on the above items

0.13%

-23

-0.97%

Other comprehensive income for the year, net of tax

311

13.41%

618

26.02%

Total comprehensice income for the year, net of tax attributedto shareholders of parent company

508

21.91%

803

33.81%

BALANCE SHEET

	2017		2016
	$M	Percentage	$M	Percentage
Current Assets
Cash and cash equivalents	80	0.92%	118	1.38%
Trade receivables	260	3.00%	194	2.27%
Financial Instruments	59	0.68%	71	0.83%
Other assets	32	0.37%	23	0.27%
Total Current Assets	432	5.00%	406	5.00%
Non-current assets
Property, plant and equipment	7961	91.88%	7771	91.02%
Intangible assets	58	0.67%	47	0.55%
Deferred tax	43	0.50%	40	0.47%
Financial Instruments	172	1.98%	274	3.21%
Total non-current assets	8234	95.00%	8132	95.00%
Total assets	8665	100.00%	8538	100.00%
Current Liabilities
Payables and accuals	296	3.42%	205	2.40%
Employee entitlements	15	0.17%	15	0.18%
Current portion of termborrowings	170	1.96%	214	2.51%
Finance lease payable	1	0.01%	1	0.01%
Financial Instruments	67	0.77%	48	0.56%
Current tax payable	30	0.35%	30	0.35%
Total current Liabilities	579	6.68%	513	6.01%
Non-current liabilities
Term borrowings	1022	11.79%	1000	11.71%
Deferred tax	1710	19.73%	1617	18.94%
Provisions	9	0.10%	8	0.09%
Finance lease payable	46	0.53%	47	0.55%
Financial Instruments	124	1.43%	203	2.38%
Term payables	93	1.07%	100	1.17%
Total non-current liabilities	3004	34.67%	2975	34.84%
Total liabilities	3583	41.35%	3488	40.85%
Net assets	5082	58.65%	5050	59.15%
Shareholders' equity
Share capital	1598	18.44%	1597	18.70%
Reserves	3484	40.21%	3453	40.44%
Total shareholders' equity	5082	58.65%	5050	59.15%

Using the following financial ratiosfor 2016 and 2017 periods, and other associated

information available in the publicdomain, assess the financial health of MEL from the

view of an investor.

Liquidity ratios

b) Asset management efficiencyratios

c) Profitability ratios

d) Market ratios

Assume you are a banker evaluating aloan request from Meridian Energy Limited

(MEL) for $220 million. ConsideringMELâs recent earnings announcements and

earnings forecast updates, what wouldbe your concerns in deciding on approval or

denial of the loan request? Use thecompanyâs capital structure ratios for 2016 and 2017

in your explanation.

apricotwallaby871

ACCT 1A Lecture Notes - Lecture 23: Comprehensive Income, Equity Method, Financial Statement

Document Summary

Get access

Related Documents

ACCT 1A Lecture Notes - Lecture 26: Financial Statement, Capital Account, Limited Liability

ACCT 1A Lecture Notes - Lecture 14: Share Capital, Retained Earnings, Authorised Capital

ACCT 1A Lecture Notes - Lecture 13: Budget, Financial Statement, Comprehensive Income

Related Questions