Question

Ketelemob Limited (KL) established on 1October 2013 acquired 80% of the ordinary share capital of Tanzania Mobilephones Limited (TML ) on 1 January 2016 when the accumulated profit figure of TML was Tsh.1,350 million.TML has not issued additional share capital since 1 January 2016.Ketelemod Limited (KL) has acquired 75% of the ordinary shares of Meru Limited on 1 October 2014 when the revenue reserves of MEru Limited amounted to KSh. 140 million .On 31st March 2017, Katelemob Limited disposed off 1/3 of its investment in Meru Limited (ML). The draft Financial Statements of KL,ML and TML for the year ended 30 Septemebr 2017 are as follows:

	Ketelemod Limited	Meru Limited	Tanzania Mobilephones Limited
	Ksh.'million'	Ksh.'million'	Tsh.'million'
Sales	3,112	2,000	16,224
Cost Of Sales	(1,867)	(1,600)	(11,024)
Gross Profit	1,245	400	5,200
Distribution Cost	(423)	(136)	(1,872)
Administrative Expenses	(369)	(114)	(1,248)
Loss on Exchange	(21)
	(813)	(250)	(3,120)
Operating Profit	432	150	2080
Finance Costs	(9)		(120)
Dividend Received	8
Profit Before Tax	431	150	1,960
Income Tax Expense	(126)	(58)	(585)
Profit for the Period	305	92	1,375

Extract of Statement of Changes in Equity for the Period ended 30th September 2017

	Ketelemon Limited	meru Limited	Tanzania Mobilphones Limited
	Ksh.'million'	Ksh.'million'	Tsh.'million'
Accumulated Profit as at 1st October 2016	293	156	1,820
Profit for the period	305	92	1,375
Dividend: Interim paid	(60)	(36)	(130)
Dividend : Final	(1000		(240)
As at 30th Septemebr 2017	483	212	2,825

Statement of Financial Position as at 30 Septemebr 2017

	Ketelmob Limited	Meru Limited	Tanzania Mobilephones Limites
	Ksh.'million'	Ksh.'million'	Tsh.'million'
Assets
Non-Current Assets
Property, Plant and Equipment	418	450	4,241
Investment in Tanzania Mobilephones Limited	220
Investment in Meru Limited	360
	998	450	4,241
Current Assets
Inventories	153	165	852
Trade and Other Receivables	239	50	1,248
Cash	78	30	192
	470	245	2,292
Total Assets	1,468	695	6,533
Equity and Liabilities
Capital and Reserves
Share Capital: Authorised , issued and fully paid 20m/90m	520	200	900
Share Premium	90	100	300
Exchange Reserve	(9)
Retained Earnings	438	212	2,825
Shareholders Funds	1,039	512	4,025
Non-Current Liabilities
Defrred Tax	25	37	192
Long-Term Loan	150
	175	37	1,392
Current Liabilities
Trade and Other Payables	143	79	828
Current Tax Liabilities	11	67	48
Dividends Payable	100		240
	254	146	1,116
Total Equity and Liabilities	1,468	695	6,533

Additional Information:

1.The disposal proceeds from the sale of shares in Meru Limited on 31st MArch 2017 , which had not been accounted for in the books of KL , amounted to Sh.150 million in cash.KL will account for the remaining interest in Meru Limited using the equity method in accordance with IAS 28.

2.TML paid the interim dividend on 31 March 2017 and interest on its long term loan on 30 September 2017.

3.In order to hedge its investment inTML , borrowed Tsh.1,800 million in Tanzania on 1 January 2016 . The rate of interest on this loan is 6% per annum and is payable in a single amount on 30th Septemebr each year.The exchange loss on this loan for the period ended 30 Septemebr 2016 had been classified as equity.The exchange loss for the year ended 30 September 2017 has been charged against KL's profit for the year.The overall loss should be accounted for in accordance with IAS 21 and IFRS 9 .The loan has been determined as an effective hedge.

4. The following exchange rates are relevant:

1 January 2016 Ksh.1= Tsh.15

1 October 2016 Ksh. 1=Tsh.14

1 April 2017 Ksh. 1=Tsh.13

30th September 2017 Ksh. 1= Tsh.12

Weighted Average for the year to 30th Septemebr 2017 Ksh.1= Tsh.13

5. It can be assumed that transactions in the subsidiaries took place evenly over the year , except where indicated above.

Required:

(a) The group Statement of income for the year ended 301 septemebr 2017

(b) Extract of the group Statement of Changes in Equity for the period ended 30th Septemebr 2017

(c) The group Statement of Financial Position as at 30th Septemebr 2017

( Round all figures to the nearest Ksh. million)

Answer 1

Statement of Income
		(Amount in Ksh. Million)
Particulars	Note no.	Year ended 30 Setember, 2017
Sales		6360
Cost of Sales		-4315
Gross Profit		2045
Distribution Cost		-703
Administrative Expenses		-579
Loss on Exchange		-21
		-1303
Operating Profit		742
Finance Cost		-18.23
Dividend Received		8
Profit before Tax		732
Income Tax Expense		-229
Profit for the Period		503
Statement of Changes in Equity
		(Amount in Ksh. Million)
Particulars	Note no.	Year ended 30 Setember, 2017
Accumulated Profit as at 1st October 2016		579.00
Profit for the period		502.77
Dividend: Interim paid		(106.00)
Dividend : Final		(1,018.46)
As at 30th Septemebr 2017		912.31
Statement of Financial Position as at 30 Septemebr 2017
		(Amount in Ksh. Million)
Particulars	Note no.	Year ended 30 Setember, 2017
Assets
Non-Current Assets
Property, Plant and Equipment		1,194.23
Investment in Tanzania Mobilephones Limited		220.00
Investment in Meru Limited		360.00
		1,774.23
Current Assets
Inventories		383.54
Trade and Other Receivables		385.00
Cash		122.77
		891.31
Total Assets		2,665.54
Equity and Liabilities
Capital and Reserves
Share Capital: Authorised , issued and fully paid 20m/90m		789.23
Share Premium		213.08
Exchange Reserve		(9.00)
Retained Earnings		867.31
Shareholders Funds		1,860.62
Non-Current Liabilities
Defrred Tax		76.77
Long-Term Loan		150.00
		319.08
Current Liabilities		-
Trade and Other Payables		285.69
Current Tax Liabilities		81.69
Dividends Payable		118.46
		485.85
Total Equity and Liabilities		2,665.54