BAP plc, a UK company, acquired 100% of BUN’s common stock on 1 April 2015. BUN is
incorporated in Greece. At 1 April 2015 BUN’s retained profits amounted to €1,900m.
The balance sheets of the two companies at 31 March 2019 were as follows:
| BAP £’m 1,250 |
BUN €’m 4,000 |
Plant and machinery |
| Investment in BUN | 3,200 | |
| Inventory | 1,270 | 1,200 |
| Receivables | 2,800 | 1,700 |
| Total assets | 8,520 | 6,900 |
| Long-term loans Trade payables Total liabilities Net assets Equity Ordinary shares/common stock Retained earnings |
700 1,000 |
| 6,700 7,400 1,120 |
400 1,400 5,500 |
| 120 1,000 1,120 |
1,000 4,500 5,500 |
i) The statements of changes in equity for the year ended 31 March 2019 contained
the following information:
| BAP £’m 800 |
BUN €’m 3,000 |
Retained earnings at 31.3.18 |
| Profits for the year Dividends |
400 (200) |
1,500 NIL |
| Retained earnings at 31.3.19 | 1,000 | 4,500 |
| The following rates of exchange applied: | ||
| 31.3.18 Average for year to 31.3.19 |
1.3€ to £1 1.2€ to £1 |
| 31.3.19 ii) |
1.1€ to £1 An impairment review at 31 March 2019 suggested that the value of goodwill on acquisition has not declined. |
REQUIRED:
a) Prepare a consolidated balance sheet at 31 March 2019 for the BAP group,
b) Calculate the differences on foreign exchange resulting from the translation of BUN’s
balance sheet and income statement from € into £.
c) Part of this difference will relate to the recalculation of goodwill each year using the
new closing rate. In order to prove this, calculate the figure of goodwill shown in the
2018 accounts.
d) The remainder of the difference on foreign exchange amounting to £268 will be
shown in the Changes in Equity Statement in the retained earnings column. Prepare a
consolidated statement of retained earnings for the year ended 31 March 2019 in the
following format:
At 31.3.18
Profits for year
Difference on exchange
Dividends
At 31.3.19
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