Icaew diploma in ifrss

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Requirement

Explain the accounting treatment of the above transaction in accordance with IAS 39, including relevant calculations and journal entries (insofar as the information provided permits. Your answer should also include financial statement extracts showing the presentation of the debentures and swap in the financial statements for the year ended 31 December 2010.
(15 marks)

(25 marks)

ICAEW\DIPLOMA IN IFRSs Page
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3

Power Group
Power is a listed group reporting under IFRS. The group was established when Power purchased an 80% of the ordinary share capital of Shuttle, a listed company, on
1 January 2009 for $7.6 million. At that date, Shuttle's financial statements showed retained earnings of $4.6 million and a revaluation surplus of $570,000. The fair value of Shuttle's net assets at the date of acquisition was higher than their carrying amount due to the following items
$'000
Contractual customer relationships not recognised in Shuttle's financial statements 200 Excess of market value over the carrying amount of inventories
30 The customer relationships were deemed to have an average remaining useful life of five years at 1 January 2009. The inventories were sold later in that year. Power opted to measure the non-controlling interests in Shuttle at their fair value at the date of the acquisition. The share price of Shuttle on that date was $18.00. During the current year, on 1 April 2010, Power was able to purchase another 10% of the ordinary share capital of Shuttle from a minority shareholder at a cost of $1.18 million. The statements of financial position of Power and Shuttle as at 31 December 2010 (correctly prepared in accordance with IFRSs) areas follows
Statements of financial position as at 31 December 2010
Power Shuttle
ASSETS
$'000
$'000
Non-current assets
Property, plant & equipment
20,240 8,720 Cost of investment in Shuttle
8,780
- Intangible assets
3,300 780 32,320 9,500
Current assets
4,900 1,280 37,220 10,780
Equity
Share capital ($1 shares)
2,000 500 Retained earnings
25,280 7,680 Revaluation surplus
3,840 840 31,120 9,020
Non-current liabilities
2,000 800
Current liabilities
4,100 960 37,220 10,780 The total comprehensive income of Shuttle for the year ended 31 December 2010 was
$1.8 million of which $0.2 million related to revaluations of property, plant and equipment and the remainder profit or loss. The income and expenses of Shuttle accrued evenly since the date of acquisition. No dividends were paid by Shuttle in 2010.

ICAEW\DIPLOMA IN IFRSs Page
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Requirements

(a) Prepare the consolidated statement of financial position of the Power Group
(as ab bconsolidation schedule) as at 31 December 2010.
(20 marks)

Notes

Ignore any deferred tax effect of adjustments. Work to the nearest $1,000. b) Explain and briefly justify the key changes being made to consolidation proposed by ED
10 Consolidated Financial Statements.
(5 marks)



(25 marks)