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QUESTION 4
Kimbay Plc., an entity with the head office in Abuja, Federal Capital Territory of Nigeria
acquired 70% of the share capital of Kantool on 1 January 2011, a company based in
Japan for 6,900,000 Yen. The retained earnings on this date was 4,500,000 Yen.
The fair value of the identifiable net assets of the company was 12,375,000 Yen and
the net asset relates to items of property plant and equipment. Similarly, the fair value
of the non-controlling Interest (NCI) in Kantool Plc as at 1 January, 2011 was 6,250,000
Yen. It is the policy of Kimbay Plc to use the “full goodwill method” in the preparation
of the group’s financial statements. Kantool Plc’s profit for the year ended 31 December
2011 was 2,000,000 Yen. The acquisition on 1 January 2011 was done in Japan when
the following exchange rates were in force:
Yen to Naira
1/1/2011 6
31/12/2011 5
The average rate for the year ended 31 December 2011 was 5.5 Yen to N1.
KANTOOL PLC
Statement of Financial Position as at 31 December 2011.
Yen (000)
Assets:
Non-Current Assets 9,500
Financial Assets 1,250
10,750
Current Assets 8,250
19,000
Equity and Liabilities
Ordinary share capital 5,000
Retained earnings 7,500
12,500
Non-current liabilities 4,000
Current liabilities 2,500
PROFESSIONAL EXAMINATION I - MAY 2012
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