Note 1 – Alpha’s investment in Beta
On 1 April 2011, Alpha acquired 75 million of the 100 million equity shares of Beta and gained control of Beta. Alpha acquired the equity shares in Beta by issuing one new share in Alpha for every two acquired in Beta. On 1 April 2011, the fair value of an equity share in Alpha was $4·40. On 1 April 2011, the net assets of Beta had a fair value of $200 million, all of which had been disposed of, or settled by, 31 March 2017.

Alpha used the proportion of net assets method for measuring the non-controlling interest when recognising the goodwill on acquisition of Beta. No impairments of goodwill on acquisition of Beta have been necessary in the consolidated financial statements of Alpha up to and including 31 March 2017.

Beta is a single cash generating unit. On 31 March 2018, the annual impairment review indicated that the recoverable amounts of the net assets, including goodwill, of Beta at that date were $350 million. Any impairments of goodwill should be charged to cost of sales.

Note 2 – Alpha’s investment in Gamma
On 1 April 2012, Alpha acquired 40 million of the 50 million equity shares in Gamma and gained control of Gamma. Alpha paid $145 million in cash for the equity shares.

On 1 April 2012, the carrying amounts of the net assets of Gamma in its individual financial statements were $150 million and their fair values were $170 million. The differences were caused by:

– Property – whose fair value exceeded the carrying amount by $12 million. $8·4 million of this difference referred to the depreciable component of this property. The estimated useful life of the depreciable component of the property at 1 April 2012 was eight years.

– Plant and equipment – whose fair value exceeded the carrying amount by $8 million. The estimated remaining useful life of the plant and equipment of Gamma at 1 April 2012 was four years.

All depreciation of property, plant and equipment is charged to cost of sales.

Alpha used the fair value method for measuring the non-controlling interest when recognising the goodwill on acquisition of Gamma. The fair value of an equity share in Gamma on 1 April 2012 was $3·50. This can be used to measure the fair value of the non-controlling interest in Gamma on 1 April 2012.

No impairments of goodwill on acquisition of Gamma have been necessary in the consolidated financial statements of Alpha up to and including 31 March 2017.

Note 3 – Disposal of shares in Gamma
On 30 November 2017, Alpha disposed of its entire equity shareholding in Gamma for a cash consideration of $196 million. Income tax payable on this disposal is expected to be $5 million. On 30 November 2017, Alpha credited the disposal proceeds to a suspense account and has made no other accounting entries. You can assume that the profits of Gamma for the year ended 31 March 2018 accrued evenly.

Note 4 – Intra-group trading
Alpha supplies a component which has been used by both Beta and Gamma. Alpha applies a mark-up of one-third to the cost of these supplies when computing the sales price. Details of sales of the component to Beta and Gamma in the current accounting period, and the holdings of inventory of the component by two entities, are as follows:

Note 5 – Leased asset
On 1 April 2017, Alpha began to lease a property. The lease term was for five years. The lease does not transfer ownership of the property to Alpha at the end of the lease term. Alpha does not have an option to purchase the property at the end of the lease term. The estimated useful life of the property at 1 April 2017 was 20 years. Rentals payable by Alpha for the use of the property were $1 million per annum, payable annually in arrears. Alpha incurred direct costs of $100,000 in arranging to lease the property. In the year ended 31 March 2018, Alpha charged both the annual rental of $1 million and the direct costs of $100,000 to administrative expenses.

The rate of interest implicit in this lease is 7% per annum. The present value of $1 payable for five years annually in arrears at a discount rate of 7% is $4·10.

All depreciation should be charged to cost of sales.

Note 6 – Investment income
The investment income, which is shown in Alpha’s statement of profit or loss, represents dividends received from its subsidiary entities and also income arising from a portfolio of loan investments. This portfolio is classified by Alpha as fair value through other comprehensive income. The gain on re-measurement of the portfolio to fair value at 31 March 2018 was $5·6 million. This gain has not yet been recognised in the financial statements of Alpha.

Note 7 – Retirement benefit plan
Alpha has established a defined benefit plan for its workforce. Relevant details are as follows:

– The net defined benefit obligation at 31 March 2017 was $2·5 million.
– The net defined benefit obligation at 31 March 2018 was $4 million.
– The current service cost for the year ended 31 March 2018 was $5 million.
– The contributions paid by Alpha into the plan during the year ended 31 March 2018 were $4·8 million.
– The benefits paid out by the plan to retired members during the year ended 31 March 2018 were $2·5 million.
– On 1 April 2017, the market yield on high quality corporate bonds was 5% per annum.

In the year ended 31 March 2018, Alpha charged the contributions paid to administrative expenses but made no other accounting entries. The post-employment plans for the employees of Beta and Gamma are defined contribution plans.

The relevant accounting entries in the financial statements of both Beta and Gamma are both correct.

Required:
Prepare the consolidated statement of profit or loss and other comprehensive income of Alpha for the year ended at 31 March 2018. You do not need to consider the deferred tax effects of any adjustments you make.

Note: You should show all workings to the nearest $’000.