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Dolby Co (Mar/Jun17)

On 1 January 20X6, Dolby Co acquired 75% of Laven Co's equity shares by means of a share exchange of two shares in Dolby Co for every three Laven Co shares acquired. On that date, further consideration was also issued to the shareholders of Laven Co in the form of $100 8% loan notes for every 100 shares acquired in Laven Co. None of the purchase consideration, nor the outstanding interest on the loan notes at 31 March 20X6, has yet been recorded by Dolby Co. At the date of acquisition, the share price of Dolby Co and Laven Co is $3·20 and $1·80 respectively.
The summarised statements of financial position of the two companies as at 31 March 20X6 are:

    $ $    
  Consideration transferred   960,000    
  Fair value of non-controlling interest   360,000    
      1,320,000    
  Fair value of net assets:        
  Shares 100,000      
  Retained earnings 480,000         (580,000)    
      740,000    
      650,000    
    $'000      
  Shares (18m × 2/3 × $4.85) 58,200      
  Deferred consideration (18m × $1.98 × 1 / 1.1) 35,640      
    93,840      
           
  Subsidiary profits ($400,000 x 6/12)                          200,000      
  Write off goodwill (per question, this is fully impaired)                          (12,500)      
  Additional depreciation ($450,000/10 x 6/12)                          (22,500)      
                             165,000      
           
  NCI at 20%                            35,500      
           
                             177,500      
           
    $'000      
  Property, plant and equipment                              3,000      
  Identifiable intangible asset                                500      
  Inventories                                300      
  Trade receivables less payables                                200      
                                 4,000      
           
           
           
           
Lease liabilities ($000)    
    b/f                310    
Paid (balance)                                                    80 New asset additions                70    
c/f                                                   300        
           
           
                                                   380                 380    
           
           
      Dolby Co Laven Co Adier
      $'000 $'000 $'000
  Assets        
  Non‐current assets        
  Property, plant and equipment (note (i))          75,200      31,500      21,000
  Investment in Amery Co at 1 April 20X5 (note (iv))            4,500             -    
               79,700      31,500      21,000
           
  Current assets        
  Inventory (note (iii))            19,400      18,800        5,000
  Trade receivables (note (iii))            14,700      12,500        3,000
  Bank              1,200           600  
               35,300      31,900  
  Total assets          115,000      63,400      29,000
           
  Equity and liabilities        
  Equity        
  Equity shares of $1 each            50,000      20,000        5,000
  Retained earnings – at 1 April 20X5            20,000      19,000      15,000
                               – for year ended 31 March 20X6          16,000        8,000        6,000
               86,000      47,000      26,000
  Non‐current liabilities        
  8% loan notes              5,000  Nil   Nil 
           
  Current liabilities (note (iii))            24,000      16,400  
  Total equity and liabilities          115,000      63,400      29,000

The following information is relevant:

1. At the date of acquisition, the fair values of Laven Co's assets were equal to their carrying amounts. However, Laven Co operates a mine which requires to be decommissioned in five years' time. No provision has been made for these decommissioning costs by Laven Co. The present value (discounted at 8%) of the decommissioning is estimated at $4million and will be paid five years from the date of acquisition (the end of the mine's life).

2. Dolby Co's policy is to value the non-controlling interest at fair value at the date of acquisition. Laven Co's share price at that date can be deemed to be representative of the fair value of the shares held by the non-controlling interest

3. The inventory of Laven Co includes goods bought from Dolby Co for $2·1million. Dolby Co applies a consistent mark-up on cost of 40% when arriving at its selling prices. 
On 28 March 20X6, Dolby Co despatched goods to Laven Co with a selling price of $700,000. These were not received by Laven Co until after the year end and so have not been included in the above inventory at 31 March 20X6.
At 31 March 20X6, Dolby Co's records showed a receivable due from Laven Co of $3million, this differed to the equivalent payable in Laven Co's records due to the goods in transit.
The intra-group reconciliation should be achieved by assuming that Laven Co had received the goods in transit before the year end.

4. The investment in Amery Co represents 30% of its voting share capital and Dolby Co uses equity accounting to account for this investment. Amery Co's profit for the year ended 31 March 20X6 was $6million and Amery Co paid total dividends during the year ended 31 March 20X6 of $2million. Dolby Co has recorded its share of the dividend received from Amery Co in investment income (and cash).

5. All profits and losses accrued evenly throughout the year.

6. There were no impairment losses within the group for the year ended 31 March 20X6

Required:

Prepare the consolidated statement of financial position for Dolby Co as at 31 March 20X6.

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