山西：HKICPA香港注册会计师考试试题之QP模块A

　　山西：HKICPA香港注册会计师考试试题之QP模块A！
 

　　QP Module A (Dec11) Question
 

　　SECTION A – CASE QUESTIONS  (Total: 50 marks)
 

　　Answer ALL of the following questions.  Marks will be awarded for logical argumentation and appropriate presentation of the answers.
 

　　Assume that you are Mr. John Chan, the accounting manager of Global Resources Limited (GRL), which is a company incorporated in Hong Kong and listed in the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.  GRL and its subsidiaries (GRL Group) are principally engaged in the natural resources business in the People's Republic of Bangladesh; and the provision of medical equipment services and related accessories, and the provision of medical research and development services in mainland China.  Now, GRL intends to disinvest its investment in the medical research and development business.
 

　　Asia Medical Research Limited (AMR)
 

　　On 1 April 2008, GRL acquired 600,000 of the 1,000,000 ordinary shares issued by Asia Medical Research Limited (AMR) for $7.5 million in cash.  On that date, the fair value of the net identifiable assets of AMR was the same as their carrying amount, and the share capital and retained earnings of AMR were $1 million and $9 million respectively with no other components of equity.  GRL is entitled to appoint three out of the five directors on the board. All board decisions are made by simple majority resolution.  On 1 April 2011, AMR issued 500,000 shares to a new investor, Simon Firth Limited (SFL), for $8 million.  As a result, GRL’s shareholdings in AMR decreased to 40%.  In addition, SFL has the right to appoint two new directors to the board making a total of seven directors on the board.  The fair value of GRL’s investment in AMR was valued at $9.6 million on 1 April 2011.
 

　　China Development Services Limited (CDS)
 

　　On 1 April 2010, GRL acquired 2,640,000 ordinary shares in China Development Services Limited (CDS) for $12 million in cash.  Thus GRL owns 2,640,000 out of the 4,000,000 shares of CDS, giving it a 66% interest.  On 1 April 2011, CDS issued 400,000 shares to a new investor, Michael Sun Limited (MSL), for $5.5 million.  As a result, GRL’s shareholdings in CDS decreased to 60%.  The carrying amount of CDS’s net identifiable assets in the consolidated financial statements of GRL, as at 31 March 2011, was $12.9 million.
 

　　Other relevant information:

　　(i) At the date of acquisition, the fair values of CDS’s assets were equal to their carrying amounts with the exception that the fair value of CDS’s inventory was $500,000 below its carrying amount; and it was written down by this amount shortly after acquisition as impairment loss and it has not changed in its fair value since then.

　　(ii) On 2 April 2010, GRL sold an item of plant to CDS at $2.5 million.  Its carrying amount prior to the sale was $2 million.  The estimated remaining useful life of the plant at the date of sale was five years. GRL, AMR and CDS depreciate their property, plant and equipment using the straight-line method.

　　(iii) There were no intra-group payables or receivables at 31 March 2011.  No dividends were paid during the year by any of the said companies.

　　(iv) It is the group’s policy to measure non-controlling interests at its proportionate share of the subsidiary’s net identifiable assets at the acquisition date.  Goodwill arising from the acquisition of AMR and CDS has not subsequently been impaired.  For the assets of both AMR and CDS, no gain or loss has been previously recognised in other comprehensive income.
 

　　Ms. Linda Ho, a director of GRL is concerned about the implications of the above transactions and information.  She wondered if it may result in any gain or loss to be recognised and if it may make any difference in the consolidation process.
 

　　The draft statements of financial position of the companies at 31 March 2011 are:
 

 

 

　　Question 1  (50 marks – approximately 90 minutes)
 

　　Assume that you are John Chan, the accounting manager, and you are required to draft a memorandum to Ms. Linda Ho, a Director of GRL.  In your memorandum, you should:
 

　　(a) discuss and advise, with calculations, the accounting treatments for the investment in AMR in the consolidated financial statements of GRL on 1 April 2011;(14 marks)

　　(b) discuss and advise, with calculations, the accounting treatments for the investment in CDS in the consolidated financial statements of GRL on 1 April 2011; and(10 marks)

　　(c) prepare an annex to your memorandum showing worksheets for the consolidated statement of financial position of GRL as at 1 April 2011 after considering the transactions and other information.  Ignore the deferred tax implications.(26 marks)
 

　　(Consolidation adjustments are to be shown in the form of a worksheet.  You have to show the detailed calculations of each figure, but journal entries are not required.)
 

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