1. Objectives of the assignment

• The aim of this assignment is to prepare a group statement of cash flows and discuss the potential ethical implications of professional and managerial decisions in the preparation of statement of cash flows.

 

1. Submission Requirements

• This assignment is worth 20%. You are required to complete the assignment in pair. It is your responsibility to find your assignment partner. Individual assignments will NOT be accepted.
• The due date for the assignment is 11am, 21 October 2013.
• You are required to prepare and submit the assignment in both hard and soft copies (i.e. email).
• A hard copy of your assignment will need to be placed in your lecturer’s mail box. An email submission will need to be sent by the due date.
• Both students need to include their name and student Id on the cover sheet (refer to Appendix 2).
• Supporting documentations must be included
  • Completed cover sheet
  • Assignment marking guide (refer to Appendix 3)

 

1. Marking Criteria

• The assignment will be assessed on the content, completeness of information, accuracy of calculation, appropriateness of format, grammar, and spelling and other additional information deemed relevant in relation to the issues. Refer to the marking guide for the breakdown of marks.
• No further instructions other than those contained in this document.
• The marking guide is given to students as it is part of the assignment that you demonstrate an understanding of how the issues should be addressed.

 

1. Assignment questions and requirement

• Refer to Appendix 1

 

 

 

Appendix 1:    Addison Ltd’s financial statements and additional information

Addison, a public limited company, operates in the manufacturing sector. You, the chief accountant of Addison Ltd, are preparing the consolidated financial statements for the year ended 2012 in accordance with International Financial Reporting Standards (IFRSs). The draft consolidated financial statements are almost done except the statement of cash flows. Now you are gathering the information for completing the task. You found the following information is relevant to the preparation of the statements of cash flows.

• Addison acquired 10% of the ordinary shares of Pink Ltd on 1 December. The consideration was $4m. Addison has treated this as an investment in equity instruments in the financial statements to 31 December 2011 with changes in fair value taken to profit/loss for the year. There were no changes in fair value in the year to 31 December 2011. At the January 2012, the fair value of the 10% holding in Pink Ltd held by Addison at the time of the business combination was $5m and the fair value of the non-controlling interest in Pink was $20m.
• 1 January 2012, Addison acquired a further 50% of the ordinary shares of Pink and gained control of the company. The consideration was $30m. The purchase consideration comprised cash of $15m and shares of $15m. The fair value of the identifiable net assets of Pink, excluding liabilities, at the date of acquisition comprised PPE $15m, intangible assets $18m, receivables $5m, and Cash $7m. The tax base of the identifiable net assets of Pink was $40m at 1 January 2012. The tax rate of Pink is 30%.
• Addison has exchanged surplus land with a carrying value of $10m for cash of $15m and plant valued at $4m. Depreciation for the period for PPE was $27m.
• Addison purchased a research project from a third party including certain paters on 1 December 2011 for $8m and recognised it as an intangible asset. During the year, Addison incurred further costs, which included $2m on completing the research phase, $4m in developing the product for sale and $1m for initial marketing costs.
• On 31 December 2012, Pink Ltd made a rights issue on a 1 for 4 basis. The issue was fully subscribed and raised $5m. Deferred tax of $1million arose in the year on the gains on investments in equity in the year was made to take changes in fair value through other comprehensive income.
• Addison owns an investment property, during the year, part of the air conditioning system of the property, which had a carrying value of $500,000, was replaced by a new system, which cost $1m. Addison uses the fair value model for measuring investment property.
• The associate did not pay dividends in the year.

 

The following statements are the draft financial statements of Addison Ltd.

 

 

 

 

 

The following statements are the draft financial statements of Addison Ltd.

Addison ltd
Statement of Financial Position
As at 31 December
2012		2011
$000		$000
Assets
Current assets
Cash and cash equivalents	213,000		121,000
Trade receivables	62,000		113,000
Inventories	105,000		128,000
Total current assets	380,000		362,000
Non-current assets
Property, plant and equipment	327,000		254,000
Investment property	8,000		6,000
Goodwill	48,000		68,000
Intangible assets	85,000		72,000
Investment in associate	54,000		–
Investment in equity instruments	94,000		90,000
Total non-current assets	616,000		490,000
Total assets	996,000		852,000
Equity and liabilities
Current liabilities
Trade payables	144,000		55,000
Current tax liabilities	33,000		30,000
Total current liabilities	177,000		85,000
Non-current liabilities
Long-term borrowings	67,000		71,000
Deferred tax	35,000		41,000
Total non-current liabilities	102,000		112,000
Total liabilities	279,000		197,000
Equity
Share capital	290,000		275,000
Retained earnings	355,390		324,000
Other components of equity	15,000		20,000
Non-controlling interest	56,610		36,000
Total equity	717,000		655,000
Total equity and liabilities	996,000		852,000
Addison ltd
Statement of Comprehensive Income
for the year ended 31 December
$000			$000
Revenue		432,000
Less: Cost of sales		317,000
Gross profit		115,000
Add: Other income		25,000
Less: Selling costs		55,500
Administrative expenses		36,000
Finance costs		6,000
Add:  Gains on property		10,500
Share of profit of associate		6,000
Profit before tax		59,000
Less: Income tax expense		11,000
Profit for the year		48,000
Other comprehensive income after tax
Add: Gain on investments in equity instrument		2,000
Less: Losses on property revaluation		7,000
Other comprehensive income for the year, net of tax		-5,000
Total comprehensive income for the year		43,000
Profit attributable to
Owners of the parent		38,000
Non-controlling interest		10,000
48,000
Total comprehensive income attributable to
Owners of the parent		31,390
Non-controlling interest		11,610
43,000

 

 

 

 

 

 

 

Addison ltd
Statement of Changes in Equity
for the year ended 31 December
$000	$000
Comprehensive income for the year	48,000
Share capital balance at 1 January 2012	275,000
Share capital issued	15,000
Share capital balance at 31 December 2012	290,000
Retained earnings balance at 1 January 2012	324,000
Comprehensive income for the year	36,390
Dividend paid	5,000
Retained earnings balance at 31 December 2012	355,390
Investments in equity instruments balance at 1 January 2012	4,000
Comprehensive income for the year	2,000
Investments in equity instruments balance at 31 December 2012	6,000
Revaluation surplus (PPE) at 1 January 2012	16,000
Comprehensive income for the year	7,000
Balance at 31 December 2012	9,000
Non-controlling interest balance in 1 January 2012	36,000
Dividend paid	13,000
Rights issue	2,000
Acquisitions	20,000
Comprehensive income for the year	11,610
Non-controlling interest balance in 31 December 2012	56,610
Total equity	717,000

 

Required:

1. Prepare a consolidated statement of cash flows for the Addison group using the indirect method under IAS 37 Statement of cash flows (15 marks). You must show your working for each item in the statement of cash flows.
2. Discuss the reasons of preparing a statement of cash flows and ethical principles in the preparation of corporate reports (5 marks).

 

Curtin Business School School of Accounting

 

Student Name & ID:	Student signature:
1.
2.

 

Scale of 0 to 5 for each criterion where 0 = Inadequate/incorrect and 5 = adequate/correct
Criteria	0	1	2	3	4	5	TOTAL
Question 1:
Appropriateness of the format of statement of cash flows
Accuracy of the calculation:
Interest payable
Profit from associate
Depreciation
Amortisation
Impairment of goodwill
Gain on disposal of land
Gain on investment property
Loss on replacement of investment property
Gain on revaluation of investment in equity instrument
Increase in inventory
Increase in receivables
Decrease in payables
Interest paid
Taxation paid
Payments to purchase NCA
Receipts from sale of land
Cash paid to acquire subsidiary
Acquisition of associate
Purchase of investment property
Purchase of intangible assets
Purchase of investment in equity instruments
Cash repayment of loans and debentures
Right issue to non-controlling interest shareholders
Equity dividend paid
Proceeds from share issue
Dividend paid to NCI
Cash generated from operating activities
Cash generated from investing activities
Cash generated from financing activities
Question 2:
Layout, Font (Calibri 12 or Times New Roman 12 or Arial 11)
Grammar/Spelling
Statement of cash flows
Discussion 1
Discussion 2
Ethical principles in the preparation of corporate reports
Discussion 1
Discussion 2
Discussion 3
Discussion 4
Discussion 5
Discussion 6
Total Marks (i.e. 200 = 40 items x 5)
Total Marks (20%) = 20 x Total marks /200

 

Curtin Business School School of Accounting

 

 

 

 

 

 

 

 

 

1. Objectives of the assignment

• The aim of this assignment is to prepare a group statement of cash flows and discuss the potential ethical implications of professional and managerial decisions in the preparation of statement of cash flows.

 

1. Submission Requirements

• This assignment is worth 20%. You are required to complete the assignment in pair. It is your responsibility to find your assignment partner. Individual assignments will NOT be accepted.
• The due date for the assignment is 11am, 21 October 2013.
• You are required to prepare and submit the assignment in both hard and soft copies (i.e. email).
• A hard copy of your assignment will need to be placed in your lecturer’s mail box. An email submission will need to be sent by the due date.
• Both students need to include their name and student Id on the cover sheet (refer to Appendix 2).
• Supporting documentations must be included
  • Completed cover sheet
  • Assignment marking guide (refer to Appendix 3)

 

1. Marking Criteria

• The assignment will be assessed on the content, completeness of information, accuracy of calculation, appropriateness of format, grammar, and spelling and other additional information deemed relevant in relation to the issues. Refer to the marking guide for the breakdown of marks.
• No further instructions other than those contained in this document.
• The marking guide is given to students as it is part of the assignment that you demonstrate an understanding of how the issues should be addressed.

 

1. Assignment questions and requirement

• Refer to Appendix 1

 

 

 

Appendix 1:    Addison Ltd’s financial statements and additional information

Addison, a public limited company, operates in the manufacturing sector. You, the chief accountant of Addison Ltd, are preparing the consolidated financial statements for the year ended 2012 in accordance with International Financial Reporting Standards (IFRSs). The draft consolidated financial statements are almost done except the statement of cash flows. Now you are gathering the information for completing the task. You found the following information is relevant to the preparation of the statements of cash flows.

• Addison acquired 10% of the ordinary shares of Pink Ltd on 1 December. The consideration was $4m. Addison has treated this as an investment in equity instruments in the financial statements to 31 December 2011 with changes in fair value taken to profit/loss for the year. There were no changes in fair value in the year to 31 December 2011. At the January 2012, the fair value of the 10% holding in Pink Ltd held by Addison at the time of the business combination was $5m and the fair value of the non-controlling interest in Pink was $20m.
• 1 January 2012, Addison acquired a further 50% of the ordinary shares of Pink and gained control of the company. The consideration was $30m. The purchase consideration comprised cash of $15m and shares of $15m. The fair value of the identifiable net assets of Pink, excluding liabilities, at the date of acquisition comprised PPE $15m, intangible assets $18m, receivables $5m, and Cash $7m. The tax base of the identifiable net assets of Pink was $40m at 1 January 2012. The tax rate of Pink is 30%.
• Addison has exchanged surplus land with a carrying value of $10m for cash of $15m and plant valued at $4m. Depreciation for the period for PPE was $27m.
• Addison purchased a research project from a third party including certain paters on 1 December 2011 for $8m and recognised it as an intangible asset. During the year, Addison incurred further costs, which included $2m on completing the research phase, $4m in developing the product for sale and $1m for initial marketing costs.
• On 31 December 2012, Pink Ltd made a rights issue on a 1 for 4 basis. The issue was fully subscribed and raised $5m. Deferred tax of $1million arose in the year on the gains on investments in equity in the year was made to take changes in fair value through other comprehensive income.
• Addison owns an investment property, during the year, part of the air conditioning system of the property, which had a carrying value of $500,000, was replaced by a new system, which cost $1m. Addison uses the fair value model for measuring investment property.
• The associate did not pay dividends in the year.

 

The following statements are the draft financial statements of Addison Ltd.

 

 

 

 

 

The following statements are the draft financial statements of Addison Ltd.

Addison ltd
Statement of Financial Position
As at 31 December
2012		2011
$000		$000
Assets
Current assets
Cash and cash equivalents	213,000		121,000
Trade receivables	62,000		113,000
Inventories	105,000		128,000
Total current assets	380,000		362,000
Non-current assets
Property, plant and equipment	327,000		254,000
Investment property	8,000		6,000
Goodwill	48,000		68,000
Intangible assets	85,000		72,000
Investment in associate	54,000		–
Investment in equity instruments	94,000		90,000
Total non-current assets	616,000		490,000
Total assets	996,000		852,000
Equity and liabilities
Current liabilities
Trade payables	144,000		55,000
Current tax liabilities	33,000		30,000
Total current liabilities	177,000		85,000
Non-current liabilities
Long-term borrowings	67,000		71,000
Deferred tax	35,000		41,000
Total non-current liabilities	102,000		112,000
Total liabilities	279,000		197,000
Equity
Share capital	290,000		275,000
Retained earnings	355,390		324,000
Other components of equity	15,000		20,000
Non-controlling interest	56,610		36,000
Total equity	717,000		655,000
Total equity and liabilities	996,000		852,000
Addison ltd
Statement of Comprehensive Income
for the year ended 31 December
$000			$000
Revenue		432,000
Less: Cost of sales		317,000
Gross profit		115,000
Add: Other income		25,000
Less: Selling costs		55,500
Administrative expenses		36,000
Finance costs		6,000
Add:  Gains on property		10,500
Share of profit of associate		6,000
Profit before tax		59,000
Less: Income tax expense		11,000
Profit for the year		48,000
Other comprehensive income after tax
Add: Gain on investments in equity instrument		2,000
Less: Losses on property revaluation		7,000
Other comprehensive income for the year, net of tax		-5,000
Total comprehensive income for the year		43,000
Profit attributable to
Owners of the parent		38,000
Non-controlling interest		10,000
48,000
Total comprehensive income attributable to
Owners of the parent		31,390
Non-controlling interest		11,610
43,000

 

 

 

 

 

 

 

Addison ltd
Statement of Changes in Equity
for the year ended 31 December
$000	$000
Comprehensive income for the year	48,000
Share capital balance at 1 January 2012	275,000
Share capital issued	15,000
Share capital balance at 31 December 2012	290,000
Retained earnings balance at 1 January 2012	324,000
Comprehensive income for the year	36,390
Dividend paid	5,000
Retained earnings balance at 31 December 2012	355,390
Investments in equity instruments balance at 1 January 2012	4,000
Comprehensive income for the year	2,000
Investments in equity instruments balance at 31 December 2012	6,000
Revaluation surplus (PPE) at 1 January 2012	16,000
Comprehensive income for the year	7,000
Balance at 31 December 2012	9,000
Non-controlling interest balance in 1 January 2012	36,000
Dividend paid	13,000
Rights issue	2,000
Acquisitions	20,000
Comprehensive income for the year	11,610
Non-controlling interest balance in 31 December 2012	56,610
Total equity	717,000

 

Required:

1. Prepare a consolidated statement of cash flows for the Addison group using the indirect method under IAS 37 Statement of cash flows (15 marks). You must show your working for each item in the statement of cash flows.
2. Discuss the reasons of preparing a statement of cash flows and ethical principles in the preparation of corporate reports (5 marks).

 

Curtin Business School School of Accounting

 

 

 

 

 

 

 

 

 

 

Due Date:                               __________________________________________

 

Submitted Date & Time:      __________________________________________

Student Name & ID:	Student signature:
1.
2.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scale of 0 to 5 for each criterion where 0 = Inadequate/incorrect and 5 = adequate/correct
Criteria	0	1	2	3	4	5	TOTAL
Question 1:
Appropriateness of the format of statement of cash flows
Accuracy of the calculation:
Interest payable
Profit from associate
Depreciation
Amortisation
Impairment of goodwill
Gain on disposal of land
Gain on investment property
Loss on replacement of investment property
Gain on revaluation of investment in equity instrument
Increase in inventory
Increase in receivables
Decrease in payables
Interest paid
Taxation paid
Payments to purchase NCA
Receipts from sale of land
Cash paid to acquire subsidiary
Acquisition of associate
Purchase of investment property
Purchase of intangible assets
Purchase of investment in equity instruments
Cash repayment of loans and debentures
Right issue to non-controlling interest shareholders
Equity dividend paid
Proceeds from share issue
Dividend paid to NCI
Cash generated from operating activities
Cash generated from investing activities
Cash generated from financing activities
Question 2:
Layout, Font (Calibri 12 or Times New Roman 12 or Arial 11)
Grammar/Spelling
Statement of cash flows
Discussion 1
Discussion 2
Ethical principles in the preparation of corporate reports
Discussion 1
Discussion 2
Discussion 3
Discussion 4
Discussion 5
Discussion 6
Total Marks (i.e. 200 = 40 items x 5)
Total Marks (20%) = 20 x Total marks /200

 

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