QUESTION (30 marks)
The Protea Ltd Group is a group of listed companies in the floriculture industry. Below are the financial statements of the Protea Ltd Group of companies for the financial year ended 31 December 2023:
PROTEA LTD GROUP: CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
| 2023 | 2022 | |
| R | R | |
| ASSETS | ||
| Non-current assets | 3 515 000 | 1 500 000 |
| Land (at fair value) | 3 500 000 | 1 500 000 |
| Goodwill | 15 000 | – |
| Current assets | 1 430 000 | 940 000 |
| Trade and other receivables | 430 000 | 345 000 |
| Inventories | 750 000 | 425 000 |
| Cash and cash equivalents | 250 000 | 170 000 |
| TOTAL ASSETS | 4 945 000 | 2 440 000 |
| EQUITY AND LIABILITIES | ||
| Share capital | 1 700 000 | 1 000 000 |
| Retained earnings | 933 500 | 156 700 |
| Revaluation reserve | 156 800 | – |
| Equity attributable to owners of the parent | 2 790 300 | 1 156 700 |
| Non-controlling interest | 255 000 | – |
| Total equity | 3 045 300 | 1 156 700 |
| Non-current liabilities | 1 220 700 | 740 300 |
| Non-current borrowings | 840 000 | 500 000 |
| Deferred tax | 380 700 | 240 300 |
| Current liabilities | 679 000 | 543 000 |
| Trade and other payables | 369 000 | 423 000 |
| Taxation payable | 310 000 | 120 000 |
| Total liabilities | 1 899 700 | 1 283 300 |
| TOTAL EQUITY AND LIABILITIES | 4 945 000 | 2 440 000 |
PROTEA LTD GROUP: CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2023
| Revenue | 11 000 000 |
| Cost of Sales | (5 500 000) |
| Gross profit | 5 500 000 |
| Other income (including interest received of R48 000) | 460 000 |
| Operating expenses: |
(4 356 000) |
| Sundry expenses – all cash | |
| Interest paid | (140 000) |
| Profit before taxation | 1 464 000 |
| Taxation | (382 320) |
| PROFIT FOR THE YEAR | 1 081 680 |
| Other comprehensive income (net of tax) | 156 800 |
| TOTAL COMPREHENSIVE INCOME | 1 238 480 |
| Profit for the year attributable to: | |
| Owners of the parent | 875 680 |
| Non-controlling interest | 206 000 |
| 1 081 680 | |
| Total comprehensive income for the year attributable to: | |
| Owners of the parent | 1 032 480 |
| Non-controlling interest | 206 000 |
| 1 238 480 |
Additional information:
• There were no disposals or devaluations of land during the year.
• During the current financial year, Protea Ltd decided to acquire an investment (90% interest) in a subsidiary, Peony Ltd, in cash. Peony Ltd then became their only subsidiary.
• On the acquisition date, the fair value of the identifiable assets and liabilities of Peony Ltd were as follows:
| R | |
| Property | 520 000 |
| Trade receivables | 400 000 |
| Inventory | 243 000 |
| Cash | 52 000 |
| Deferred tax | (58 050) |
| Trade payables | (166 950) |
• The goodwill on the group statement of financial position relates only to goodwill that resulted from the acquisition of the 90% interest in Peony Ltd. There were no impairments of goodwill since acquisition.
• Protea Ltd elected to measure the non-controlling interest in Peony Ltd at its proportionate share of Peony Ltd’s identifiable net assets when it was initially acquired.
• The revaluation reserve arose during the financial year due to land owned by Protea Ltd, which was revalued for the first time. The revaluation reserve relates only to this revaluation.
• Both Protea Ltd and Peony Ltd paid dividends during the financial year. Dividends paid by Protea Ltd amounted to R98 880 for the current financial year.
• Cashflows from dividends and interest paid and received are classified as operating activities.
• For all financial years, the company income tax rate is 27% and 80% of capital gains are included in taxable income.
REQUIRED:
Protea Ltd needs your help to prepare extracts from the group consolidated statement of cash flows for the Protea Ltd Group for the financial year ended 31 December 2023 using the indirect method.
• You need to prepare only the sections relating to cash flows from operating activities and cash flows from investing activities.
• Use Excel formulas and links as much as possible.
Protea Ltd has already drawn up an accounting template in Excel. On this Excel template, you need to complete the data, perform calculations, and ensure that the data pulls through from the Consolidated Statement of Financial Position, the Consolidated Statement of Profit or loss and Other Comprehensive Income and the notes and workings worksheet to the Group Consolidated Statement of Cash Flows worksheet by using effective excel formulas.
Retain the given structure i.e. do not delete or add any columns or rows in the given sheets (not even the grey-shaded column D in the notes and workings worksheet). This is to ensure that the grading of your script is done more efficiently. You may however add additional worksheets into the Excel workbook.
Answers to Above Questions on Financial Reporting
Answer 1: The sections relating to cash flows from operating activities and cash flows from investing activities for Protea Group Ltd are prepared as follows:
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