QUESTION ELEVEN (11): ICAG NOVEMBER 2019

The draft statements of financial position of Atia Ltd and that of Santana Ltd as at 30 June 2019 are as follows:

Assets	Atia Ltd	Santana Ltd
Non-current assets	GH000	GH000
Property, plant and equipment	196,000	42,000
Investments	60,000	-
	256,000	42,000
Current assets:
Inventories	20,000	10,000
Trade receivable	19,000	8,500
Cash and bank balance	8,350	3,825
	47,350	22,325
Total assets	303,350	64,325
Equity and liabilities
Ordinary share capital (issued at GHC1 each)	95,000	30,000
Retained earnings	105,000	18,250
Revaluation surplus	20,700	2,000
	220,700	50,250
Non-current liabilities:
Deferred consideration	14,000	-
Current liabilities:
Trade payables	30,000	9,500
Income tax payables	20,500	4,575
Accrued expenses	18,150	-
	68,650	14,075
	303,350	64,325

Additional relevant information:

On July 1, 2018, Atia Ltd purchased 21 million shares of Santana Ltd. At this date the retained earnings of Santana Ltd were estimated at GH17 million whereas the revaluation surplus was GH2 million respectively.

Atia Ltd paid an initial amount of cash of GH46 million and agreed to pay the shareholders of Santana Ltd a further GH14 million on July 1, 2020. The financial accountant has recorded the full amounts of both elements of the consideration in the investments as shown in the statement of financial position.

Atia Ltd has a cost of capital of 8% per annum.

During the accounting period, Atia Ltd sold goods totaling an amount of GH4 million to Santana Ltd at a gross profit margin of 25%. At 30 June 2019, Santana Ltd still had a total of GH0.5 million of these goods in inventory. Atia Ltd has a normal margin usually to third party customers at 45%.

On the acquisition date, the fair values of Santana Ltds net assets were equal to their carrying amounts with the exception of some inventory, which had cost GH 1.5 million but had a fair value of GH1.8 million. On 30 June 2019, 10% of these goods remained in the inventories of Santana Ltd.

It is the policy of Atia Ltd to value the non-controlling interest using the fair value method. For this purpose, the value of the non-controlling interest at acquisition date is estimated at GH7.5 million.

Impairment test was conducted at the year end and no goodwill impairment occurred.

Required:

Prepare the consolidated statement of financial position of the Atia group as at 30 June 2019.

(20 marks)