ACCA · Question 31 · Preparation of Consolidated Financial Statements

Section C - Constructed Response 1

AeroHoldings, an aerospace manufacturing firm, acquired 80% of the equity shares of HeliTech on 1 January 20X4. You are preparing the consolidated Statement of Financial Position as at 31 December 20X5.

Draft Statements of Financial Position at 31 December 20X5:

Assets ($'000)
Property, Plant & Equipment: AeroHoldings 45,000 | HeliTech 18,000
Investment in HeliTech: AeroHoldings 22,000 | HeliTech Nil
Inventory: AeroHoldings 8,500 | HeliTech 4,200
Receivables: AeroHoldings 6,400 | HeliTech 3,100
Cash: AeroHoldings 1,200 | HeliTech 800

Equity and Liabilities ($'000)
Share Capital ($1 shares): AeroHoldings 30,000 | HeliTech 10,000
Retained Earnings: AeroHoldings 35,100 | HeliTech 9,500
Payables: AeroHoldings 18,000 | HeliTech 6,600

Additional Information:

1. At the acquisition date (1 Jan 20X4), HeliTech's retained earnings were $4,000,000.
2. At acquisition, the fair value of HeliTech's PPE was $2,000,000 higher than its carrying amount. This PPE had a remaining useful life of 10 years at acquisition. Depreciation is straight-line.
3. AeroHoldings values the Non-Controlling Interest (NCI) at fair value. At acquisition, the fair value of the 20% NCI was $5,200,000.
4. During 20X5, HeliTech sold components to AeroHoldings for $1,500,000 at a mark-up on cost of 25%. At 31 December 20X5, AeroHoldings still held $500,000 of these components in inventory.
5. At 31 December 20X5, AeroHoldings' receivables included $400,000 owed by HeliTech. HeliTech's payables included the corresponding amount.
6. An impairment review at 31 December 20X5 concluded that consolidated goodwill should be impaired by 10%.

Requirement:
Prepare the Consolidated Statement of Financial Position for the AeroHoldings Group as at 31 December 20X5. Show all workings clearly, including Goodwill, Retained Earnings, and Non-Controlling Interest.