Illustration of consolidated cashflow statements, Financial Accounting

Illustration of consolidated cashflow statements

The voice of the Nation Limited is a Nairobi based media company. Its Consolidated Income Statement for the year ended 30 April 2003, and its Consolidated Balance Sheets as at 30 April 2002 and 2003 are as follows:

Consolidated Income Statement for the year ended 30 April 2003				Consolidated Balance Sheet as at 30 April	2003 Sh.million	2002 Sh.million
			Sh.million	Non-current assets:
Sales Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Finance costs: Int expense Share of results of associate Profit before tax Tax: Group companies Share of associate Profit before minority interest Minority interest Profit after tax		(110) (15)	3,325 (1,935) 1,390 (225) (790) 375 (8) 50 417 (125) 292 (28) 264	Property, plant and equip. (Cost or Valuation) Accumulated Depreciation Intangible asset: Goodwill Amortisation Investment in associate Current assets: Inventories Receivables and prepayments Cash and cash equivalents	2,297 (931) 1,366 126 (30) 96 263 1,725 276 607 93 976	2,134 (733) 1,401 126 (17) 109 246 1,756 178 623 71 872
Additional information:				Current Liabilities: Payables and accrued expenses Current tax Borrowings: bank overdraft Net current assets Capital and reserves: Share capital Revaluation reserve Retained earnings Shareholders’ funds Minority interest Non-current liabilities: Borrowings: commercial paper Deferred tax	615 22 8 645 331 2,056 500 260 839 1,599 240 110 107 217 2,056	484 16 133 645 331 1,940 500 133 725 1,413 204 200 123 323 1,940
1.	The holding company, the subsidiary and the associate had all paid dividends during the year. A class of assets in the subsidiary had been revalued during the year. Depreciation of Sh.20 million had been written back on the revaluation. The transfer to the revaluation surplus account in the subsidiary was Sh.120 million. The minority interest owns 40% of the share capital of the subsidiary. Property, plant and equipment which had cost Sh.100 million and on which accumulated depreciation stood at Sh.47 million at 30 April 2002 was sold for Sh.70 million in the year. The group classifies interest paid as an operating cash flow, there were no accruals at the beginning or at the end of the year in respect of this item. It classifies dividends received as an investing activity and any dividends paid as an investing activity. The bank overdraft is classified as a component of each and cash equivalent.

Required:

Prepare the Consolidated Cash flow Statement for the year ended 30 April 2003 for the group using the indirect method.

Solution Voice of Nations Ltd. Consolidated cashflow statement for the year ended 30 April 2003
	Sh m	Sh. m
Cashflows from operating activities
Group profits before tax	417
Adjustments – cash items
Depreciation	265
Amortization of goodwill	13
Profit on disposal of PPE (70 – (100 – 47)	(17)
Interest expense	8
Share of results in associate company	(50)
	636
Changes in making capital
Increase in inventory	(98)
Decrease in debtors and prepayment	16
Increase in payables	131
Cash from operations	685
Less interest paid	(8)
Tax paid	(120)
Net cash received from operating activities		557
Cashflows from investing activities
Cash proceeds on sale of PPE	70
Acquisition of PPE	(163)
Dividends from associate company	18
Net cash used in investing activities		(75)
Cash flows from financing activities
Dividends paid – Group	(150)
Minority interest	(40)
Repayment of commercial paper	(90)
Net cash used in financing activities		(280)
Net cash used in financing activities		202
Net increase in cash and cash equivalents b/d		(117)
Cash and cash equivalents c/d		85

NOTE: Cash and cash equivalents
	B/d sh m	C/d Sh. M
Cash and cash equivalents	71	93
Bank overdraft	(188)	(8)
Short term investments	-	-
	(117)	85

Workings

1. Depreciation

Depreciation account
	Sh m		Sh m
PPE – Revaluation	20	Disposal	100
Disposal	47	Profit and loss	265
Balance c/d	931
	998		998

2. Tax

Tax account
	Sh m		Sh m
Balance c/d	120	Balance b/d – def	123
Balance c/d – def	107	Current tax	16
Current	22	Profit and loss	110
	249		249

3. Acquisition of PPE

PPE cost account
	Sh m		Sh m
Balance b/d	2,134	Disposal	100
Revaluation reserve - gain	120	Depreciation on revaluation	20
Cash book	163
		Balance c/d	2,297
	2,417		2,417

4. Dividends from associate company

PPE cost account
	Sh m		Sh m
Balance b/d	246	Share of tax	15
Share of PBT	50	Dividends	18

		Balance c/d	263
	296		296

5. Dividends paid

Group retained profits
	Sh m		Sh m
Dividend balance figure	150	Balance b/d	725
Balance c/d	839	Profit after tax & MI	264
	989		989

6. Minority interest account
	Sh m		Sh m
Dividend balance figure	40	Balance b/d	204
Balance c/d	240	Revenue reserve	48
		Profit after tax	28
	280		280

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