Sale of Shares. Using Mapitaccountancy. Step 1 Download free mind maps & print Step 2. Step 3 Log in & get ready to study the course

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Download "Sale of Shares. Using Mapitaccountancy. Step 1 Download free mind maps & print Step 2. Step 3 Log in & get ready to study the course"

Melissa Williams
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1 Using Mapitaccountancy Sale of Shares Step 1 Download free mind maps & print Step 2 You need to create an account and verify your to do this Buy the course of your choice All courses cover entire syllabus with lots of illustrations & cost 50 Paypal will process credit/debit cards even if you don t have an account Step 3 Log in & get ready to study the course Print the workbook illustrations to use during lectures Step 4 View the videos & attempt the illustrations Have your printed mind maps and workbook with you when watching Watch the recap of the last lecture before you do the next Type Loss of Control Sale To NCI What? Treatment From Subsidiary to Investment or Associate or nothing From Sub to Sub Do Working Proceeds X Net Assets (Sub) (X) Goodwill (X) NCI X FV Residual Holding X Gain/(Loss) X/(X) Do Working DR CASH Received X CR NCI X (% Sold x (Net Assets + Goodwill) Difference to Equity Reserve X

2 Vertical Groups Step 1: Determine Control Look at group structure (NOT EFFECTIVE INTEREST!) Illustrations 1 & 2 in your workbook Step 2: Calculate Effective Interest in S1 Use this for all workings for S1 Step 3: Do Workings 2 x Equity Tables (W2) & 2 x Goodwill (W3) Step 4: Calculate Indirect Holding Adjustment NCI% in S x Investment by S in S1 DR NCI to Reduce CR Goodwill in S1 to reduce cost of investment

3 Vertical Groups Income Statement 70% 60% P S S1 $50m $25m Effective Interest in S1 Parent (70% x 60%) 42 NCI 58 Total 100 Indirect Holding Adjustment NCI% in S x Investment by S in S1...! 30% x $25m = $7.5m Step 1: Set out Group Structure Is goodwill working required? Step 2: Do workings for goodwill if required Net assets & goodwill computation Step 3: Go through rest of question note by note Set up a working for each one Step 4: NCI share of Profit & Other Comp. Income NCI% Profit given in Question X NCI % depreciation on FV adjustments (X) NCI% goodwill impairment (X) NCI % PURP if sub is seller (X) NCI% Any other affecting sub profit (X) X

4 Statement of Financial Position Step 1: Skim read question to gain understanding Do W1 for group structure June 2010 Q1: Ashanti Group Statement of Comprehensive Income Step 2: First few notes are consolidation workings Use these to do W2 - W5 for group Step 3: Rest of notes refer to parent Don t affect any working except W5 so don t total it yet! Step 4: Do working for each note you come to Adjust through W5 and on face of SFP Step 5: Prepare SFP & leave any notes you run out of time on Ensure you don t run over your time allocation

5 Purchase of Shares Type Step - Acquisition What? Treatment From Investment or Associate to Subsidiary Step 1: Revalue original investment to Fair Value (Gain or Loss to I/S) Step 2: Cost of Investment in Sub (W3) Cost of New Shares + FV Original Investment December 2011 Q1 - Traveler Statement of Financial Position Buy Out NCI From Sub to Sub Do Working CR CASH PAID OUT X DR NCI X (Based on Current Value of NCI) Difference to Equity Reserve X

6 Test Yourself! Mixed Groups December 2009 Q1 - Grange Statement of Financial Position Step 1: Determine Control Look at group structure (NOT EFFECTIVE INTEREST!) Step 2: Calculate Effective Interest in S1 Remember direct & indirect interest Use this for all workings for S1 Step 3: Do Workings 2 x Equity Tables (W2) & 2 x Goodwill (W3) Step 4: Calculate Indirect Holding Adjustment NCI% in S x Investment by S in S1 DR NCI to Reduce CR Goodwill in S1 to reduce cost of investment

7 Mixed Groups 70% 30% P S S1 $50m 25% $20m $30m Effective Interest in S1 Direct Interest 25 Indirect (70% x 30%) 21 Effective Interest 46 NCI 54 Total 100 Indirect Holding Adjustment NCI% in S x Investment by S in S1...! 30% x $30m = $9m Mixed Groups Illustration Red, Don & Tel Statement of Financial Position

8 Foreign Currency Groups W1: Do a detailed W1 checking dates etc. Look for any inter company loans P to S and calculate FX difference on translation at Y/E - take to (W2) W2: Do this in the foreign currency. Remember FX G/L in W1 to affect net assets at Y/E W3: Do this in foreign currency. Investment in Parent currency? Translate at acq. rate. When Goodwill calculated translate for SFP at Cl. rate. Do Working: $ Cost of Investment at closing rate X (Foreign amount invested translated to parent currency) Cost of Investment at acquisition rate rate (X) (Foreign amount invested translated to parent currency) FX Gain / (Loss) to W5 X/(X) W4: As usual translated at closing rate. June 11 Q1 - Rose, Petal & Stem Statement of Financial Position (Foreign Subsidiary) W5: As usual in parent currency - translate post-acq. profit at closing rate.

9 Group Cash-Flow Statements Group Cash-Flow Statements Working $ Opening Balance + Closing Balance - Items increasing opening Balance + Items decreasing opening Balance - Total 0 If Result of Working is a cash-flow... Positive Negative ASSET LIABILITY Cash Flow Statements INFLOW OUTFLOW OUTFLOW INFLOW PPE $m Opening Balance + Closing Balance - Disposals - Additions + Depreciation - Purchase Subsidiary + Sale of Subsidiary - Impairment - Revaluation (SOCIE) + Total 0 Investment Property $m Opening Balance + Closing Balance - Additions + Disposals - Gain on Fair Value + Loss on Fair Value - Total 0 Intangible Assets $ m Opening Balance + Closing Balance - Purchase of Subsidiary Sale of Subsidiary - Goodwill $m Opening Balance + Closing Balance - Disposal of Subsidiary Acquisition of Subsidiary + New Expenditure + Amortisation - Total 0 Impairment - Total Associate $m Opening Balance + Closing Balance - Acquisition of Associate + Profit for the Year + Dividend From Associate Total 0 Financial Assets $m Opening Balance + Closing Balance - Additions + Disposals - Gains on Financial Assets Impairment of Financial Assets - + Purchase of New Sub + Sale of Sub - Total 0 - Working Capital Opening Balance Closing Balance $m $m $m INV RE C PAY Sale of Sub Acquisition of Sub Total Share Capital $m Opening Balance + Closing Balance - Issue Shares + Total 0 NCI $m Opening Balance + Closing Balance - Acquisition of Sub + Sale of Sub - Buy out NCI - Sale to NCI + Profit to NCI in Year + Dividend Paid - Long Term Borrowings $m Opening Balance + Closing Balance - Repayments in Year - New Loans + Total 0 Tax $m Opening Balance on Tax due Opening Balance on Deferred Tax Closing Balance on Tax due Closing Balance on Deferred Tax Tax Charge in IS + Deferred Tax on Sale of Sub Deferred Tax on Acquisition of Sub Total Total 0

10 IFRS 10 - Control Q2 & Q3 Exam Technique An investor is exposed to or has rights to variable returns from an investee......and has power to affect those returns through power over investee. 1 2 Relevant Activities Determine Policy Investment decisions Appoint key staff Capital decisions Power Voting Rights Potential Voting Rights Appoint key staff Decision making 3 Variable Dividends Returns Variable Remuneration Other variable <50% - look at dispersement of other votes...still may have control Step 1 ID standard Step 2 Use the summaries from this course Step 3 Apply this to the scenario Re-write the information in the scenario......then say this suggests that... State what you know about it

11 IFRS 8 - Operating Segments O R P Operating Segment? Reportable? Present Business Activities CEO Reviews Info Separate Info Available 10% + Total Revenue 10% + Total Profit 10% + Total Assets Revenue, P/L, Assets & Liab, Interest, Tax, Dep n Central Costs on reasonable basis How management use info (even if not IFRS compliant) 75 75% Total Revenue Reported? If not then ignore O&R above and split further. June 08 Q2 a) Norman! December 11 Q1 b) Traveler

12 IAS 19 - Pensions Defined Benefit Scheme Defined amount paid out at end e.g. % of salary If deficit Co. has legal/constructive obligation Asset or Liability to Company Defined Contribution Scheme Defined amount paid into scheme No obligation on Co. Expense contributions annually June 2010 Q2 d) Cate Type of Scheme?

13 IAS 19 - Pensions Introducing Paul T. Pensioner IAS 19 Calculations B I S C U I T IAS 19 - Pensions Paul T. B/F 0 Ques 0 Ques Benefits Paid CR DR Interest Cost DR CR Service Costs DR CR Contributions P/L Assets DR DR Unrealised G/L Bal DR/CR Bal Increase Assets CR DR Unr g SOCI Liabilities CR Total at Year End Add Ques Add Ques

14 IAS 19 - Pensions A company maintains a defined benefit pension scheme for it s employees. The following information is relevant:! The pension assets brought forward in 20X0 $1,800 with a closing balance of $2,700.! The company contributes $90 per year into the scheme.! Benefits paid out in the period were $100.! The liabilities of the scheme were $1,600 at the start of the period and $2,100 at the end.! The discount rate is 12%.! The terms of the scheme have changed meaning that past service costs have arisen of $35 and the current service costs for the period are $70. Expected Return on Assets Working $ 12% Return on opening of 1,800 (1,800 x 12%) 216 Interest Cost (Unwinding of Discount) Working $ 12% Discount Rate (1,600 x 12%) 192 B I S C U I T IAS 19 - Pensions P/L Assets DR Paul T. B/F 0 1, ,600 Benefits Paid Interest Cost Service Costs Contributions 90 Unrealised G/L Increase Assets Unr g SOCI Liabilities CR Total at Year End 81 2, ,100

15 IAS 19 - Pensions Income Statement $ Service Costs 105 Net Interest ( ) -24 Figure For Profit & Loss 81 Other Comprehensive Income Net Re-measurement Component 391 Statement of Financial Position Net Pension Asset (If Recoverable) (2,700-2,100) 600 December 2007 Q2 (Adjusted) In Workbook

16 IAS 19 - Pensions (Dec 07 Q2) Expected Return on Assets Working $ 5% Return on opening of 190 (190 x 5%) 9.5 Interest Cost (Unwinding of Discount) Working $ 5% Unwinding of Discount on 200 (200 x 5%) 10 IAS 19 - Pensions (Dec 07 Q2) B I S C U I T P/L Assets DR Paul T. B/F Benefits Paid Interest Cost Service Costs Contributions 17 Unrealised G/L Increase Assets Unr g SOCI Liabilities CR Total at Year End

17 IFRS 2 - Share Based Payments Income Statement $ Service Costs 20 Net Interest (10-9.5) 0.5 Figure For Profit & Loss 20.5 Other Comprehensive Income Net Re-measurement Component 1.5 Statement of Financial Position Net Pension Liability ( ) 15 S E C Scope Payment for Goods in Shares Share Option Schemes Employee Purchase Schemes Goods = FV Goods on that Date Employee Services Equity Settled DR Wages CR Equity DR Wages CR Liability Settled In Shares Cash Settled Settled In Cash based on Share Price S Settled Early? Yr Yr No. Expected to Vest No. Expected to Vest Fair Value at GRANT DATE NO CHANGE Fair Value at REPORTING DATE CHANGE EACH YR Speed Up Recognition Business Combinations NOT! Financial Instruments with no goods delivered Proportion of Vesting Period Total Charge Expected Charge in Period Proportion of Total Charge Charge in Vesting Period Expected Period

18 IAS 16 - Non Current Assets R M Recognise Measure? Revalue If: What? UP Reliable Measure Probable Flow of Benefit Direct Costs Dismantling (Discounted amount) Separate Components Cost or revaluation less Dep n In equity to reserve (SOCI) Unless reversing impairment To I/S up to: Historic Depreciated Cost June 10 Q1 Note 6 Ashanti Group DOWN Against Previous Increase First T Transfer Then to I/S Transfer in Reserves? Revaluation Reserve to Retained Earnings Dep n on revalued amount less dep n on historic cost

19 IAS 36 - Impairment I C R I estructuring nterest Rate Rise Indicators Fall in Share Price Losses or loss of key staff Environmental D amaged Asset Compare Higher of Carrying Value TO Recoverable Amount Value in Use Fair Value Less Cost to Sell December 2009 Q2 -Key December 2011 Q3 b) - Scramble C Charge DR Income Statement (or revaluation reserve) 1. Damaged Asset CR 2. Goodwill 3. Other Assets Pro-Rata

20 Financial Instruments Classification T E S T S Hold not Sell Business Model Test Sell For Profit Contractual Cashflows Just principle & Interest Not just principle & Interest AC FVPL FVOCI Debt Hold Not Sell Just P & I All Others Never Financial Assets Just Debt Financial Assets! Financial Liabilities Equity All Never Held For Trading Not Held For Trading All Others Held For Trading Never June 2012 Q3 b) - Ethan Rules: 1. No change between FVPL & FVOCI 2. Only change between AC & FVPL to avoid mismatch or if business changes 3. No recycling of gains/losses for FVOCI

21 Impairment of Financial Assets Step 1 Check Carrying Value Step 2 Requirements: IAS 39 (Currently) Exposure Draft (Expected Loss Model) Compare to recoverable amount Discounted Future Cash Flows Objective evidence of impairment event Reliable Measure Evidence of expected event Adjust effective interest rate to reflect December 2011 Q1 - Traveler Note 4 - Bond

22 Financial Instrument Hedging Type What? Treatment Fair Value Hedge Hedged Item at FVPL Hedging Instrument at FVPL Offset P/L on each in the Income Statement June 10 Q3 a) - Seltec Cash Flow Hedge Hedged Item is FUTURE Cash-flow Hedging Instrument at FVPL Recognise P/L on Hedging Instrument in OCI Until Cash-flow occurs - then offset in IS Embedded Derivative 2 Parts to a contract: 1. Usual Contract 2. Derivative Element IAS 39: Separate out and treat derivative element as FVPL IFRS 9: Treat all at FVPL

23 Fair Value Hedging Cash Flow Hedging Hedged Item (Held at FVPL) Hedging Instrument (Derivative - always at FVPL) Hedged Item (Future Cash Flow) Hedging Instrument (Derivative - always at FVPL) New Fair Value $80,000 New Fair Value Fair Value $2m New Fair Value $1,920,000 Loss $80,000 Offset in I/S Gain $80,000 Fair Value $0 Agreed Settled Loss Initially in Reserves To I/S when Cash-flow occurs Gain Fair Value $0

24 F IAS 17 - Leases Most of UEL Finance Lease? Ownership Transfer P resent Value of Payments > F. Value P urchase = Bargain L L Lessee Lessor Record Asset Depreciate Asset Lower of Record Liability Then PV minimum lease payments Fair Value Remove Asset From F. Statements Record a Receivable Record Interest Income Adjust for Effective Interest Adjust for Cash Paid Dec 08 Q3 b) - Johan June 12 Q2 a) - William S Sale & Lease Back Profit deferred over lease term

25 IAS 37 - Provisions N E E D Liability Asset Present Constructive/legal obligation from past event Probable Outflow Reliable Measure Virtually Certain Create Asset Probable Possible Create Provision Disclose Contingent Asset Disclose Contingent Liability Nothing Remote Nothing Nothing Dec 10 Q3 a) - Greenie Dec 09 Q1 (Note 8) - Grange June 12 Q2 d) - William Measure Many Items - Expected Values One Item - Best estimate Time value material? - Discount

26 IAS 38 - Intangible Assets R C A Recognise? Capitalise? Amortise? Identifiable & Controlled Future Economic Benefit Reliable Measure Never Research Development if: Future Costs if: Straight line over UEL Indefinite life Feasible Future Economic Benefit Future Economic Benefit above previously achievable No Amortisation Assess for impairment each year June 11 Q2 c) - Lockfine Dec 11 Q2 a) - Scramble June 10 Q3 b) - Seltec

27 IAS 18 - Revenue Recognition Goods Service Both Separable Transfer of Risks & Rewards No Management Control Reliable Measure Stage of Completion of Contract Reliable Measure Probable Flow of Benefit Same contract Part Goods & Part Services Separate out if possible Dec 11 Q4 b) - Venue

28 IFRS 5 - Assets Held For Sale & Dis. Op. A F S P lan to sell A vailable Immediately Available? L ocating a buyer Marketed - reasonable price 12 Months of SFP date Fair Value Sub Discontinued? Revalue to Fair Value Any impairment to I/S Not Depreciated Major Line of Business Geographical Area Plan to sell Disclosures Required December 2009 Q2 b) -Key (Last Paragraph) December 2012 Q1 - Minny a) Note 6 & b)

29 IAS 40 - Investment Property I P S If Held For Capital Appreciation Rental Land where unsure of Use Not if rented to employees! Put revaluation through I/S with no Dep n...or Hold at Cost less Dep n Split if some own use! December 2012 Q3 a) - Blackcutt

30 IAS 12 - Income Tax Tax asset must be recoverable Deferred tax reflects timing differences Compare FS Carrying Value to tax base & multiply the difference by the tax rate... Financial Statements Show More Asset/ Income I/S Tax Effect More Tax DR Deferred Tax Def. Tax Liability CR Dec 10 Q1 Note (i) - Jocatt June 10 Q2 a) - Cate Less Asset/ Income More Liability/ Expense Less Liability/ Expense Less Tax CR Less Tax CR More Tax DR Def. Tax Asset DR Def. Tax Asset DR Def. Tax Liability CR

31 IAS 20 - Government Grants IAS 23 - Borrowing Costs E A Grant may relate to... Expense Asset Set off against expense or... Treat as other income Reduce NBV asset or... Hold as deferred income W A S When Amount Building an asset For Sale or use Capitalise interest cost Interest cost Less... Start on later of... Temporary investment income Activities begin Borrowing costs incurred Expenditure begins

32 IFRS 13 - Fair Value Levels of Inputs to determine Best Ok Quoted Active Market Identical Items Quoted price...similar items Inactive market...identical items Observe similar items 3 Not Great Replacement cost Discounted cash flows

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Corporate information DP World PLC ( the Company ) formerly known as DP World Limited, was incorporated on 9 August 2006 as a Company Limited by Shares with the Registrar of Companies of the Dubai International