SUGGESTED SOLUTION

FAR450 JUNE 2012

SOLUTION 1A
(a)
Computation for GW/BP
Mist Bhd (Associate)

Dew Bhd (subsidiary)

CT
NCI

350x40%

RMM

RMM

213

62

140
353

FV of NA on DOA:
OSC
RP

300

200

38

Other reserves

FV adjustment

___8

7
(350)

___4
214

GW/(BP)

X 30%

___3

(2.2)

(b)
W1 Computation for Gain or Loss on Second Acquisition
Dew Bhd (subsidiary)
RMM
CT

79

FV of NA on DOA:
OSC
RP
Other reserves
FV adjustment

(64.2)

300
85
4
_8
397

Gain reported in OCI

X 20%

(79.4)
__0.4

W2
Computation for Retained profit and NCI
GRP
RMM

NCI

RMM

RMM

NCI - share of net asset on DOA

140

Retained profit - Mist Bhd

RP b/ff

61

Profit FTY

25

Pre RP

(3)

Post RP

83

Depn adjustment- building 4/10 x 3yrs

(1.2)
81.8
x 30%
24.54

Bargain purchase

2.2
26.74

26.74

Retained profit - Dew Bhd

RP b/f

85

Pre RP

(38)

Post RP

47

28.2

60%

40%

18.8

Profit FTY - Dew Bhd

15

12

80%

20%

Decrease in FV of net asset acquired

(79.4)

W1

82.4

W3

Retained profit Hazel

RP b/f

100

Profit FTY

12

URP machine

(5)

Depn adjustment- machine

0.5

Ord div receivable from Dew Bhd 80% x 6

4.8

Ord div receivable from Mist Bhd 30% x 4

1.2

Gain on new acq reported in OCI

0.4

W1

180.84

W2

CSOFP

Alternative workings for NCI (W3)

FV of NA of Dew on 31/12/2011
OSC
RP
Other reserves
FV adj

300
100
4
8
412 x 20% = 82.4

Hazel Bhd Group

2

Consolidated Statement of Financial Position as at 31 December 2011

RMM
PPE (370 + 418) + 8 - 5 + 0.5
791.5
Investment in Associate (62 + 26.74 + 0.9)
89.64
Goodwill
3
Current Asset (91+55)
Ord div receivable from Mist Bhd (30% x 4)
Cash in transit

146
1.2
2
1033.34
600
180.84
40.9
821.74
82.4

OSC
GRP
Other reserves 40 + [(10 7) x 30% ]
NCI
Current liabilities (52 + 58)
Ord div payable to NCI
Ord div payable to members

(B)i.

W2

W3

110
1.2
18
1033.34

With reference to FRS 127, the presence of control determines whether a parentsubsidiary relationship exists. Ownership of more than 50% is not the only indicator
of existence of control. An investee may be deemed as a subsidiary even if the
percentage of voting rights held by the investor is less than 50%.
In the case of investment in Rainbow, Hazel is deemed to have control over Rainbow
since it is able to appoint the majority member of the BOD although its interest is only
45%.
Hence Rainbow is a subsidiary of Hazel. Therefore the financial results of Rainbow
must be consolidated for group reporting purposes.

ii.

The existence and effect of potential voting rights that are currently exercisable is to
be considered when assessing whether an entity has the power to control.
In the case of the investment in Cashew, Hazel has control over Cashew because the
potential voting rights can be considered since the call options are exercisable at any
time.
Hence Cashew is a subsidiary of Hazel. Therefore the financial results of Cashew
must be consolidated for group reporting purposes.

SOLUTION 2
3

a.
Matahari Bhd Group
Consolidated Statement of Comprehensive Income for the year ended 31/12/2011
RMmill
Turnover [(120 + 65) + (40 x6/12) + (30 x 1/3) (3 x 1/3]
214
Cost of Sales [(50+ 25 ) + (20x6/12) + (15x1/3)]- (3 x 1/3) + (0.3 x 1/3)
(89.1)
Gross profit
124.9
Expenses [(20+10) + (9x6/12) + (6 X1/3) + 0.5 - 0.04
(36.96)
Impairment of goodwill (0.2 X 20%)
(0.04)
Bargain purchase
0.1
Profit before taxation
88
Taxation [(16.8 + 8.95) + (3.3x6/12) + (2.52 X 1/3)]
(28.24)
Profit after tax
59.76
Profit after tax attributable to:
Equity holders of parent
NCI

W1

51.102
8.658
59.76

W1: Computation of NCI

RMmill
Kenanga Bhd
PAT
URP: Machine
Depreciation: Machine
Depreciation: Plant

RMmill

25
(0.2)
0.04
(0.5)

Ordinary dividend
Preference dividend

(3.75)
(4) @ 80% = 3.2
16.59 @20% = 3.318
6.518

Melati Bhd
PAT (7.7 x 6/12)
Preference dividend

3.85
(1) @ 100% = 1
2.85 @ 40% = 1.14

2.14
8.658

b.
Matahari Bhd Group
Consolidated Statement of Changes in Equity for
the year ended 31 December 2011
RP
NCI
RM million
RM million
Balance b/f
(W2) 34
(W3) 47.50
Acquisition during the year
27.14
Profit for the year
51.102
8.658
Ordinary dividend
(12)
(W4) (3.55)
Preference dividend
(5)
(W5) (4.2)
68.102
75.548
RM000
W2: RP b/f
Matahari Bhd b/f
Kenanga Bhd b/f
Less: Pre acq pft
Depreciation: Plant

32
15
(12)
(0.5)
2.5 @ 80%

W3: NCI b/f

Kenanga Bhd (1/1/10)
OSC
SP
RE
ARR
Preference Shares
Acquisition during the year
Melati Bhd
OSC
Retained profit b/f
Profit for the year
Preference shares
W4: Ordinary dividend
Kenanga Bhd
Melati Bhd
W5: Preference dividend
Kenanga Bhd
Melati Bhd

RM000

2
34

50 x 20%
10 x 20%
(15-0.5) x 20%
3 x 20%
40 x 80%

10
2
2.9
0.6
32
47.5

30 x 40%
9 x 40%
(7.7 x 6/12) x 40%
10 x 100%

12
3.6
1.54
10
27.14

11.5 x 20%
5 x 25%

2.3
1.25
3.55

4 x 80%
1 x 100%

3.2
1
4.2

c. Melati Bhd is a subsidiary of Kenanga Bhd and a sub-subsidiary of Matahari Bhd from 1
July 2011. Hence, if the machine was sold to Melati Bhd on 1 April 2011, the gain on
machinery has to be recognised in CSOCI as it is a transaction with parties outside the
group. In other words, the gain on machinery cannot be eliminated as intra-group
transactions.
5

d. The other method of accounting for JV is equity method.

Under equity method, the revenue and expenses will not be consolidated with that of the
venturer but the venturers share of profit will be disclosed as line item in CSOCI and will be
recognised as group profits.
SOLUTION 3
Budiman Bhd
Consolidated Statement of Cash Flow for the year ended 31 December 2011
RMmillion
Cash Flow from Operating Activities
Profit before taxation
Adjustments for :
Depreciation
Share of profits from associate
Finance cost
Dividend from other investments

RMmillion

88.8
12.5
(1.25)
1.5
(7.54)
94.01

Changes in working capital:

Increase in Inventories (26.5 -10)
Decrease in Accounts receivable (22.25 -21- 3.35)
Decrease in Prepayments (5.05 -7.5)
Increase in Accounts payable (9.7-2.9)
Cash generated from operations
Debenture interest paid
Taxation paid
Net cash inflow from Operating Activities

(16.5)
2.1
2.45
__6.8
88.86
(1.5)
(2)

Cash flow from Investing Activities

Acquisition of PPE
Acquisition of subsidiary
Development cost
Acquisition of other investments
Dividend from other investments
Dividend received from associate
Net cash outflow from Investing Activities

(70.1)
2.9
(47.28)
(70)
7.54
1.08

85.36

(175.86)

Cash flow from Financing Activities

Proceeds from issue of shares (100 + 20)
Payment of dividend by Budiman
Dividends paid to NCI
Net cash inflow from Financing Activities
Net increase* in Cash and Cash Equivalents
Cash and Cash equivalent at beginning of the year (32 5)
Cash and Cash equivalent at end of the year
Cash and Cash Equivalent

Opening.
Balance
32
(5)
27

Bank
Bank overdraft
Short term investment
6

120
(13.5)
(5)
101.5
11*
27
38
Closing
Balance
38
(10)
10
38

Changes
6
(5)
10
11

Workings (RM million):

b/d
I/S- fr Assoc

Investment in Associate
26.5 Div. rec *
1.25 c/d

c/d

Tax paid *
c/d

1.08
26.67

OSC
b/d
Acq - Selesa
650 Issue

450
100
100

Tax payable
2 b/d
Acq-Selesa
2.55 I/S- tax exp

1.5
0.25
2.8

b/d
Acq-Selesa
Acquisition *

PPE
714.9 I/S- Deprn
200
70.1 c/d

12.5
972.5

Sh Premium
b/d
Acq - Selesa
83 Issue

c/d

33
30
20

NCI
5 b/d
Acq-Selesa
157 Pft

Div paid *
c/d

50
90
22

SOLUTION 4
a)
RMmill
(2 x RM3.90)
(10.6 x 30% )

Consideration transferred
NCI
Fair value of net asset
Ordinary shares (4 m shares x RM2)
Retained profit
Share premium
ARR

RMmill
7.8
3.18
10.98

8
2.2
0.3
0.1

(10.6)

Goodwill
Impairment
Remaining

0.38
(0.1)
0.28

Dispose 60% of interest. Status of the investee changed from a subsidiary (70%) to an
associated company (28%).

Proceed
Carrying value of investment

7.8 x 60%

Fair value of remaining shares

1.12 x RM 3.30

Fair value of net assets as at 31/5/2011

Ordinary shares
8
Retained profit (3.3 + (1.2 x 5/12)
3.8
Share premium
0.3
ARR
0.1
12.2 x 70%
Goodwill remaining
Gain
7

RMmill
Orchid
5.88
(4.68)

RMmill
Group
5.88
3.696
9.576

______
1.2

(8.54)
(0.28)
0.756

b) The investment in Daisy would be treated as an associate since the percentage interest
was decreased to 28% and would be accounted for using the equity method .
The composition of Orchid Bhds interest in Daisy Bhd;
Bal of remaining investment at FV
Share of post profit
(4.5 3.3) x 7/12 x 28%

Investment in Daisy Bhd

3.696
0.196

Bal c/d

3.892

c) Consolidate in the statement of comprehensive income of the operation till 31 May 2011
and subsequent to that date equity account