Tafo group is a key player in the food processing industry made up only of Tafo Ltd (Tafo) and Abirem Ltd (Abirem). Below are the consolidated statement of comprehensive income of Tafo Group and the separate statements of comprehensive income of Tafo and Bonsu Ltd (Bonsu), respectively, for the year ended 31 December 2020:

Statements of comprehensive income for the year ended 31 December 2020

Additional information
i) Tafo purchased 80% of the 10 million ordinary shares (all issued at GH¢2 each) of Abirem on 1 January 2020 when the balance of Abirem’s reserves was GH¢35 million. Tafo agreed to settle the consideration in two unconditional instalments as follows:

• Cash payment of GH¢33 million on 1 January 2021; and
• Cash payment of GH¢30.25 million on 1 January 2022.

The policy of the group is to value any non-controlling interests at fair value. For this purpose, it was agreed to use the share price of Abirem as an approximation of its fair value. Abirem’s market capitalisation figures at 1 January 2020 and 31 December 2020 stood at GH¢70 million and GH¢75 million, respectively. The appropriate discount rate for Tafo is 10%. The required unwound discount has been included in the group’s (but not Tafo’s) finance costs.

ii) On 1 January 2020, a fair value exercise was carried out on Abirem’s net assets. The exercise results showed that the book value of the depreciable plant was higher than their fair value by GH¢4 million. Post-acquisition depreciation adjustment of GH¢0.8 million is required.

iii) For several years, Tafo has also held a 20% equity interest in Bonsu. On 31 December 2020, impairment loss of GH¢0.2 million was estimated for the investment in associate. The group’s policy is to present the share of the associate’s profit before tax and share of the associate’s tax expense separately within the consolidated statement of comprehensive income. The investment income of the group shown above includes the group’s share of associate’s profit before tax (including effects of the GH¢0.2 million impairment loss).

iv) Sales from Abirem to Tafo occurring evenly throughout the year amounted to GH¢8 million. By 31 December 2020, Tafo had sold all these goods except for items worth GH¢1.8 million. Abirem applies a cost plus 20% on all sales.

v) At 31 December 2020, it was concluded that 5% of the goodwill in Abirem had been impaired. Impairment has been charged to administrative expenses.

vi) Assume that all the necessary consolidation adjustments are correctly included in the above consolidated statement of comprehensive income.

Required:
a) Calculate the goodwill in Abirem at acquisition and reporting. (5 marks)

b) Prepare the statement of comprehensive income of Abirem for the year ended 31 December 2020. (10 marks)

c) Show an analysis of consolidated profit for the period and total comprehensive income attributable to non-controlling interest and parent’s equity holders. (5 marks)

a) Explain the accounting treatment for ‘deferred consideration’ and ‘contingent consideration’ in the context of the acquisition of a subsidiary by a parent entity.                                                                                                                                        (4 marks)

b) You are the Financial Accountant of Faisal Ltd (Faisal), a Ghanaian listed company, involved in food retailing. During 2017, Faisal acquired interests in Zaytuna Ltd (Zaytuna) and Medeama Ltd (Medeama).The Statement of profit or loss for Faisal, Zaytuna and Medeama for the year ended 31 December 2017 are as follows:

Additional information:
i) On 1 April 2017, Faisal purchased 12 million of the 15 million GH¢1 ordinary shares in Zaytuna at a cost of GH¢8 per ordinary share. At the date of acquisition the fair values of Zaytuna’s net assets were equal to their book value with the exception of property, the details of which are as follows:

The property, which had a useful economic life of 25 years on 1 January 2015, is in a prime commercial location and has increased dramatically in value since it was purchased by Zaytuna on 1 January 2015. The replacement cost of a similar building, with a similar remaining useful economic life at 1 April 2017, is GH¢100 million. The fair value at acquisition has not been reflected in the records of Zaytuna.
ii) On 1 July 2017, Faisal purchased 4 million of the 10 million GH¢1 ordinary shares in Medeama at a cost of GH¢6 per ordinary share. At the date of acquisition the fair values of Medeama’s net assets were equal to their book value with the exception of property that had a fair value of GH¢9 million in excess of its book value and a remaining useful life of four years.
iii) In August 2017, Faisal sold goods to Zaytuna for GH¢7.5 million and 20% of these goods remained unsold at 31 December 2017. Faisal prices its sales at cost plus 50%.

iv) On 23 January 2018, Faisal sold its former head office administrative building for GH¢1.25 million. At 31 December 2017, the building was for sale and unoccupied, with staff having moved to a new premises. The book value of the building in the statement of financial position of Faisal as at 31 December 2017 was GH¢2 million.
v) Each company charges depreciation on a time apportionment basis to operating expenses.
vi) The directors of Faisal believe that any goodwill arising on the acquisition of Zaytuna and Medeama has been impaired by 25% as at 31 December 2017. The directors have a policy of measuring non-controlling interests at the proportionate share of identifiable net assets.
(Note: All calculations may be taken to the nearest GH¢0.01 million and assume all expenses and gains accrue evenly throughout the year unless otherwise instructed.)
Required:
Prepare the consolidated statement of profit or loss account of Faisal Group for the year ended 31 December 2017 in accordance with International Financial Reporting Standards (IFRS).                                                                                               (16 marks)

Spacefon Ltd (Spacefon) in its quest to gain dominance in the telecommunication industry, bought an 80% holding in the equity of Buzz and 40% of the equity shares of Kasapa Ltd (Kasapa) on 1 July 2017. The purchase price of the investment of Buzz Ltd (Buzz) was agreed at GH¢4,400 million, of which GH¢1,600 million was paid in cash. The remaining balance was paid by issuing 800 million equity shares each of GH¢1 nominal value to the seller at their then fair value of GH¢3.50 each. The 20% non-controlling interest in Buzz had a fair value of GH¢900 million at that date. Buzz’s net assets had a fair value of GH¢4,700 million on 1 July 2017. Spacefon applies the fair value method to calculate goodwill on acquisition.
The following statements of comprehensive income relate to Spacefon and its investee companies, Buzz and Kasapa.

The following additional information is provided:
i) Included in the fair value of Buzz’s net assets on the acquisition date was some machinery owned by Buzz but carried at GH¢90 million below its fair value. The revised fair value was not incorporated into the books of Buzz as Buzz has not adopted a policy of revaluing machinery assets. The useful economic life of this machinery at the acquisition date was estimated to be six years.
ii) During the post-acquisition period, Buzz sold goods to Spacefon for GH¢50 million. These goods were sold by Buzz at a profit of 30 pesewas per every GH¢1 on sales price and 40% of the goods remained in the inventory of Spacefon at 31 October 2017.

iii) Since acquiring its investment in Buzz, Spacefon has managed the administration of the entire group. Spacefon invoiced Buzz GH¢4 million for its share of these costs. Spacefon recorded this transaction within “other income”, and Buzz within “operating expenses”.
iv) The goodwill of Buzz was reviewed for impairment at 31 October 2017 and was found to have a recoverable amount of GH¢400 million. There was no impairment of the investment in Kasapa.
v) On 1 October 2017, Spacefon sold some land to Kasapa for GH¢12 million, recording a profit of GH¢8 million. This profit is included within “other income” in the books of Spacefon.
(Note: All calculations may be taken to the nearest GH¢0.01 million and assume all expenses and gains accrue evenly throughout the year unless otherwise instructed.)
Required:
a) Calculate the goodwill arising on the acquisition of Buzz by Spacefon, and the goodwill amount that should appear in the consolidated Statement of Financial Position of Spacefon as at 31 October 2017.                                                            (3 marks)

b) Prepare a Consolidated Statement of Profit or Loss account for Spacefon Group for year ended 31 October 2017 in accordance with IFRS.                                                                                                                                                       (17 marks)