The balance sheets of H Ltd. and S Ltd. as on 31st March, 2024 were as follows: Particulars H Ltd. S Ltd. ₹ in Lakhs Assets: Non-Current Assets…

CA Final · Financial Reporting · PYQS · November 2024
The balance sheets of H Ltd. and S Ltd. as on 31st March, 2024 were as follows: Particulars H Ltd. S Ltd. ₹ in Lakhs Assets: Non-Current Assets Property, plant and equipment 14,800 6,000 Financial Assets: Investment Investment in S Ltd. 5,800 1,000 Debentures in S Ltd. 1,500 Current Assets Inventories 2,600 2,000 Financial Assets Trade receivables 4,000 3,000 (due from S Ltd.160 lakh) Dividend receivable 320 Cash and cash equivalent 500 2,000 Total 29,520 13,000 Equity and Liabilities Equity Equity Share Capital (10 per share) 10,000 4,000 Other Equity (Retained Earnings) 16,320 5,000 Non-current Liabilities 13% Debentures of 100 each 3,000 Current Liabilities Financial Liabilities: Trade Payables (due to H Ltd.120 lakh) 1,700 600 Dividend Payable 400 Other Liabilities 1,500 Total 29,520 13,000 Additional Information: (i) On 1st April, 2023, S Ltd. had 400 lakh shares of 10 each and - 3,000 lakh in its Retained Earnings in Other Equity. H Ltd. acquired 80% share of S Ltd. on 1st April, 2023 at a consideration of 5,800 lakh in cash. (ii) The following changes in book value of identifiable net assets of S Ltd. as on 1st April, 2023 are to be considered for arriving the fair value of identifiable net assets and to record the changes in their fair value on the said date. These changes in fair values are to be considered while drawing consolidated Financial Statement of the Group. Assets Book value Fair value PPE 2,500 lakhs 2,800 lakhs Inventory 500 lakhs 200 lakhs The rate of depreciation on PPE is 10% p.a. (iii) NCI was to be measured at fair value based on purchase consideration. (iv) Goodwill was impaired by 100 lakh. (v) H Ltd. sold goods worth 200 lakh to S Ltd. on credit at a profit of 20% on sales. 50% of the goods were still lying unsold. (vi) S Ltd. issued a cheque of 40 lakh in favour of H Ltd. as a part payment of the goods purchased from it in March, 2024. The cheque is yet to be received by H Ltd. (vii) Dividend payable represents the dividend declared out of pre-acquisition profit. H Ltd. credited its share of dividend from S Ltd. to its profits. Prepare the Consolidated Balance Sheet of the Group as at 31st March, 2024.

Suggested Answer and Working Notes:

Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2024 Notes No. ₹ in lakhs Assets Non-current assets Property, plant and equipment 1 21,070 Goodwill 2 150 Current assets Inventory 3 4,275 Financial assets Cash and cash equivalents 4 2,540 Trade receivables 5 6,840 Dividend receivable 6 Nil Total 34,875 Equity and Liabilities Equity Share capital - Equity shares of 10each 10,000 Other equity 7 16,292 Non-controlling interest (W.N.4) 1,824 Non-current liabilities Financial liabilities Borrowings- 13% Debentures 8 2,999 Current Liabilities Financial liabilities Trade payables 9 2,180 Dividend payable 10 80 Other liabilities 1,500 Total 34,875 Notes to Accounts 1. Property, Plant and Equipment Particulars ₹ ₹ in lakhs H Ltd. 14,800 S Ltd. 6,000 Add: Fair value gain 300 Less: Additional depreciation due to fair value gain (30) 6,270 21,070 2. Goodwill Particulars ₹ ₹ in lakhs Goodwill on acquisition of S Ltd. (Refer W.N.3) 250 Less: Impairment (100) 150 3. Inventory Particulars ₹ ₹ in lakhs H Ltd. 2,600 S Ltd. 2,000 Less: Fair value loss (300) Less: Unrealised gain (200/80% x 20% x 50%) (25) 1,675 4,275 4. Cash and cash equivalent Particulars Particulars ₹ ₹ in lakhs H Ltd. 500 Add: Cheque in Transit 40 540 S Ltd. 2,000 2,540 5. Trade Receivable Particulars ₹ ₹ in lakhs H Ltd. 4,000 Less: Mutual transaction (160) 3,840 S Ltd. 3,000 6,840 6. Dividend Receivable Particulars ₹ ₹ in lakhs H Ltd. 320 Less: Mutual transaction (320) Nil 7. Other Equity (Retained Earnings) Particulars ₹ ₹ in lakhs H Ltd. 16,320 Less: Share of pre-acquisition dividend (400 x 80%) (320) 16,000 Post acquisition RE of S Ltd. (W.N.1) 2,370 Less: Share of NCI in post-acquisition RE of S Ltd. (2,370 x 20%) (474) 1,896 Less: Impairment of goodwill (100 x 80%) (80) Less: Loss on cancellation of debentures (mutual holding) (W.N.5) (1,499) Less: Unrealised gain (W.N.6) (25) 16,292 8. Borrowings (13% Debentures) Particulars ₹ ₹ in lakhs S Ltd. 3,000 Less: Mutual holding by H Ltd. (1,000 Debentures x 100) (1) 2,999 9. Trade Payables Particulars ₹ ₹ in lakhs H Ltd. 1,700 S Ltd. 600 Less: Mutual transaction (120) 480 2,180 10. Dividend Payables Particulars ₹ ₹ in lakhs S Ltd. 400 Less: Mutual transaction (320) 80 Working Notes: 1. Analysis of Retained Earnings of S Ltd. ₹ in lakhs Closing balance as on 31st March, 2024 5,000 Less: Pre-acquisition Retained Earnings as on 1st April, 2023 (3,000 – 400) (2,600) 2,400 Less: Additional depreciation (30) Post-acquisition Retained Earnings 2,370 2. Computation of net worth (net identifiable assets) as on 1st April, 2023 ₹ in lakhs Share Capital of S Ltd. 4,000 Pre-acquisition Retained Earnings 3,000 Fair value gain on PPE (2,800 – 2,500) 300 Fair value loss on inventory (500 - 200) (300) Net Worth or Net Identifiable Assets 7,000 3. Computation of Goodwill on acquisition date of S Ltd. ₹ in lakhs Purchase consideration 5,800 NCI (by fair value method) as on 1st April, 2023 [(5,800 / 80%) x 20%] 1,450 7,250 Less: Net worth or Net Identifiable Assets (W.N.2) (7,000) Goodwill as on 1st April, 2023 250 4. Non-Controlling Interest as on 31st March, 2024 ₹ in lakhs NCI (by fair value method) as on 1st April, 2023 1,450 Less: Share of pre-acquisition dividend (400 x 20%) (80) Post-acquisition Retained Earnings (2,370 x 20%) 474 Less: Share of impairment of Goodwill (100 x 20%) (20) NCI as on 31st March, 2024 1,824 5. Loss on settlement of Debentures held by H Ltd. ₹ in lakhs Investment in Debentures by H Ltd. 1,500 Less: Nominal value of debentures held by H Ltd. (1,000 x 100) (1) Loss on settlement of investment in Debentures 1,499 6. Computation of unrealised gain by H Ltd. on sale of goods to S Ltd. ₹ in lakhs Sales price of the goods sold 200 Profit on sale of such goods (200 x 20%) 40 Unrealized gain on 50% unsold goods (40 x 50%) 20 Note: In the above solution, it is assumed that in additional information (v),200 lakh is the cost price of the goods for H Ltd. which is sold to S Ltd. at 250 lakhs i.e. after 20% profit on sales. However, alternatively it may be assumed that 200lakhs is the sales price of the goods for H Ltd. profit will be 200lakhs x 20% i.e.40 lakhs. In such a situation, the answer will be as follows: Consolidated Balance Sheet of H Ltd. and its subsidiary S Ltd. as at 31st March, 2024 Notes No. ₹ in lakhs Assets Non-current assets Property, plant and equipment 1 21,070 Goodwill 2 150 Current assets Inventory 3 4,280 Financial assets Cash and cash equivalents 4 2,540 Trade receivables 5 6,840 Dividend receivable 6 Nil Total 34,880 Equity and Liabilities Equity Share capital - Equity shares of 10each 10,000 Other equity 7 16,297 Non-controlling interest (W.N.4) 1,824 Non-current liabilities Financial liabilities Borrowings - 13% Debentures 8 2,999 Current Liabilities Financial liabilities Trade payables 9 2,180 Dividend payable 10 80 Other liabilities 1,500 Total 34,880 Notes to Accounts 1. Property, Plant and Equipment Particulars ₹ ₹ in lakhs H Ltd. 14,800 S Ltd. 6,000 Add: Fair value gain 300 Less: Additional depreciation due to fair value gain (30) 6,270 21,070 2. Goodwill Particulars ₹ ₹ in lakhs Goodwill on acquisition of S Ltd. (Refer W.N.3) 250 Less: Impairment (100) 150 3. Inventory Particulars ₹ ₹ in lakhs H Ltd. 2,600 S Ltd. 2,000 Less: Fair value loss (300) Less: Unrealised gain (W.N.6) (20) 1,680 4,280 4. Cash and cash equivalent Particulars Particulars ₹ ₹ in lakhs H Ltd. 500 Add: Cheque in Transit 40 540 S Ltd. 2,000 2,540 5. Trade Receivables Particulars ₹ ₹ in lakhs H Ltd. 4,000 Less: Mutual transaction (160) 3,840 S Ltd. 3,000 6,840 6. Dividend Receivables Particulars ₹ ₹ in lakhs H Ltd. 320 Less: Mutual transaction (320) Nil 7. Other Equity (Retained Earnings) Particulars ₹ ₹ in lakhs H Ltd. 16,320 Less: Share of pre-acquisition dividend (400 x 80%) (320) 16,000 Post acquisition RE of S Ltd. (W.N.1) 2,370 Less: Share of NCI in post-acquisition RE of S Ltd. (2,370 x 20%) (474) 1,896 Less: Impairment of goodwill (100 x 80%) (80) Less: Loss on cancellation of debentures (mutual holding) (W.N.5) (1,499) Less: Unrealised gain (W.N.6) (20) 16,297 8. Borrowings (13% Debentures) Particulars ₹ ₹ in lakhs S Ltd. 3,000 Less: Mutual holding by H Ltd. (1,000 Debentures x 100) (1) 2,999 9. Trade Payables Particulars ₹ ₹ in lakhs H Ltd. 1,700 S Ltd. 600 Less: Mutual transaction (120) 480 2,180 10. Dividend Payables Particulars ₹ ₹ in lakhs S Ltd. 400 Less: Mutual transaction (320) 80 Working Notes: 1. Analysis of Retained Earnings of S Ltd. ₹ in lakhs Closing balance as on 31st March, 2024 5,000 Less: Pre-acquisition Retained Earnings as on 1st April, 2023 (3,000 – 400) (2,600) 2,400 Less: Additional depreciation (30) Post-acquisition Retained Earnings 2,370 2. Computation of net worth (net identifiable assets) as on 1st April, 2023 ₹ in lakhs Share capital of S Ltd. 4,000 Pre-acquisition Retained Earnings 3,000 Fair value gain on PPE (2,800 – 2,500) 300 Fair value loss on inventory (500 - 200) (300) Net Worth or Net Identifiable Assets 7,000 3. Computation of Goodwill on acquisition date of S Ltd. ₹ in lakhs Purchase consideration 5,800 NCI (by fair value method) as on 1st April, 2023 [(5,800 / 80%) x 20%] 1,450 7,250 Less: Net worth or Net Identifiable Assets (W.N.2) (7,000) Goodwill as on 1st April, 2023 250 4. Non-controlling Interest as on 31st March, 2024 ₹ in lakhs NCI (by fair value method) as on 1st April, 2023 1,450 Less: Share of pre-acquisition dividend (400 x 20%) (80) Post-acquisition Retained Earnings (2,370 x 20%) 474 Less: Share of impairment of Goodwill (100 x 20%) (20) NCI as on 31st March, 2024 1,824 5. Loss on settlement of Debentures held by H Ltd. ₹ in lakhs Investment in Debentures by H Ltd. 1,500 Less: Nominal value of debentures held by H Ltd. (1,000 x 100) (1) Loss on settlement of investment in Debentures 1,499 6. Computation of unrealised gain by H Ltd. on sale of goods to S Ltd. ₹ in lakhs Sales price of the goods sold 200 Profit on sale of such goods (200 x 20%) 40 Unrealized gain on 50% unsold goods (40 x 50%) 20

Topics: Ind AS 110

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