Spreader plc is a UK parent company with a number of wholly owned subsidiaries in the USA and Europe. Extracts from the consolidated financial statements of the group for the year ended 30 April 1997 are given below.
|
Profit and loss account – year ended 30 Apri |
1997 |
1996 |
|
|
£000 |
£000 |
||
|
Turnover |
(Note 1) |
50000 |
48000 |
|
Cost of sales |
(25000) |
(22000) |
|
|
Gross profit |
25000 |
26000 |
|
|
Other operating expenditure |
(15000) |
(14200) |
|
|
Operating profit |
10000 |
11800 |
|
|
Interest payable |
(1000) |
(900) |
|
|
Profit before taxation |
(Note 2) |
9000 |
10900 |
|
Taxation |
(2800) |
(3600) |
|
|
Profit after taxation |
6200 |
7300 |
|
|
Dividend |
(3000) |
(3200) |
|
|
Retained profit |
3200 |
4100 |
|
Note 1 Analysis of turnover for the year by geographical segment
|
UK |
US |
Rest of Europe |
Total |
|||||
|
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Total sales |
15000 |
20000 |
10000 |
8000 |
30000 |
25000 |
55000 |
53000 |
|
Inter segment sales |
(2000) |
(2500) |
(1000) |
(500) |
(2000) |
(2000) |
(5000) |
(5000) |
|
Sales to third parties |
13000 |
17500 |
9000 |
7500 |
28000 |
23000 |
50000 |
48000 |
Note 2 Analysis of profit before tax for the year by geographical segment
|
UK |
US |
Rest of Europe |
Total |
|||||
|
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Segment profit |
3000 |
6000 |
1500 |
1200 |
6000 |
5000 |
10500 |
12200 |
|
Common costs |
(500) |
(400) |
||||||
|
Operating profit |
10000 |
11800 |
||||||
|
Interest payable |
(1000) |
(900) |
||||||
|
Profit before taxation |
9000 |
10900 |
||||||
Note 3 Analysis of net assets at end of year by geographical segment
|
UK |
US |
Rest of Europe |
Total |
|||||
|
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
1997 |
1996 |
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
Segment net assets |
15000 |
13500 |
6000 |
5000 |
20000 |
20000 |
41000 |
38500 |
|
Unallocated assets |
2000 |
1800 |
||||||
|
Total net assets |
43000 |
40300 |
||||||
Requirements
In your capacity as chief accountant of Spreader plc,
(a) prepare a report for the board of directors of the company which analyses the results of the group for the year ended 30 April 1997;
(b) explain why the segmental data which has been included in the extracts may need to be interpreted with caution.