Group Project FAR610

 QUESTION 1
a) Identify the status of Lions Bhd., Cheetah Bhd., and Puma Bhd. in relation to Tiger Bhd. as at 31
December 2016.

 Cheetah Bhd. and Puma Bhd. qualified as subsidiaries to Tiger Bhd. Tiger Bhd. as parent had
acquired about 75% of ordinary shares of Cheetah Bhd. and 60% of Puma Bhd. Meanwhile there
is no share acquired by Tiger Bhd. to Lions Bhd. since all shares were disposed at 31 December
2016. Thus, Lions Bhd. status to Tigers Bhd. is unrelated company or known as outsider.

b) Compute goodwill/ bargain purchase on acquisition of subsidiaries as at 31 December 2016.

Computation of Goodwill/ Bargain Purchase

Lions Bhd. Cheetah Bhd. Puma Bhd.

RM 'Million RM 'Million RM 'Million

CT 1,600.0 1,240.0 60% (400 x RM 1.40) 336

NCI 40% (2308) 923.2 at FV 800.0 40% (425) 170

(-) FVNA
OSC 1,800 1,600 400.00
RP (Pre) 300 200 + 3/12 225 (13 + 12) 25.00
(122-20)
ARR (Land) 60 100 -
SP 148 - -
(2,308.0) (1,925.5) (425)
Goodwill / 215.2 114.5 81

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 Group Project FAR610

c) Calculate gain/ loss from disposal of shares in Lion Bhd.

Gain/ (Loss) on Disposal of Shares in Lions Bhd

RM 'Million

Proceeds
1,600.00

(-)NA on 31 Dec 2016

OSC 1 800
RP b/f 352.00
ARR 60.00
SP 148.00
2 360 x 60% (1,416.00)

(-) Goodwill remaining (215.20)

Gain/ (Loss) on Disposal (31.20)

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d) Compute the group retained profit and non-controlling interest (NCI) of Tiger Bhd as at 31 December
2016 using schedule format.

Working Schedule
Working Group Retained
NCI
Profit
RM 'Million RM 'Million
NCI - Cheetah 800.00
NCI - Puma 170.00
NCI – Lions 923.20
Disposal of NCI in Lions 2360 x 40% (944.00)
6% Pref Shares of Cheetah 400.00

RP of Lions Bhd (S)

Bal b/f 352.00
(-) Pre RP (300)
Post 52.00 x 60% 31.20 x 40% 20.80

RP of Cheetah Bhd. (S)

Bal b/f 287.00
(-) Pre RP (225.5)
Post 61.50
(-) URP Inventory (4.5)
57.00 x 75% 42.75 x 25% 14.25

RP of Puma Bhd. (S)

Bal b/f 25.00
(-) Pre RP (25)
-

RP of Tiger Bhd. (H)

Bal b/f 622.00
(-)URP Machine (30.00)
FV Change in Investment Puma (140-100) 40.00
Over Depreciation Machine 3.00
(-)URP Land (90.00)

(-)Loss on disposal shares in Lions (31.20)

587.75 1,384.25

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 Group Project FAR610

e) Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income of Tiger
Bhd. for the year ended 31 December 2016.

Consolidated Statement of Profit or Loss & Other Comprehensive Income of Tiger Bhd.
for the year ended 31 December 2016
RM 'Million
Revenue [ 900 + 750 + 9/12(840) ] -120 Intercomp. Transaction 2,160.00
[ 660 + 500 + 9/12(600) ] -120 Intercomp Transaction + 4.5 URP
(-) Cost of Sales Inventory
(1,494.50)
GROSS PROFIT 665.50
Gain on sales of asset [ 120 + 20 ] - 30 URP Machine - 90 URP Land 20.00
Dividend Income [ 40 - 60% (20) Div Lions - 75% (35 - 24) Div Cheetah 19.75
(-) Admin Expenses [ 100 + 60 + 9/12(72) ] - 3 Overdep. Machine (211.00)
(-) Distribution Expenses [ 70 + 83 + 9/12(20) ] (168.00)
(-) Finance Cost [ 14 + 10 + 9/12(5) ] (27.75)
(-) Loss on Disposal of
[ answer in (b) ] (31.20)
Shares in Lions Bhd

Share of Profits from

[ 25% x 12 x 6/12 ] 1.5
Associates (Puma)

Gain on Virtual Sales of

[ Notes 2 ] 38.5
Investment (Puma)
PROFIT BEFORE TAX 307.30
Taxation [ 54 + 25 + 9/12(41) ] (109.75)
PROFIT AFTER TAX 197.55

PROFIT ATTRIBUTABLE
TO:
Owners of the Company 127.75
Non-Controlling Interest [ Working 1 ] 69.80

197.55

Working 1 (Profit Attributable to NCI)

RM 'Million
Cheetah
Profit After Tax (122-20) x 9/12 76.50
Gain on Sale of Asset 20.00
(-) Pref Dividend (24.00) x 100% 24.00
(-) URP Inventory (4.50)
68.00 x 25% 17.00
Lions
Profit After Tax 72.00 x 40% 28.80
69.80

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 Group Project FAR610

Notes 1
RM 'Million
Cost of Investment 100.00

Net Assets of Associate

OSC 400.00
RP (Pre) 13 + 6/12(12) 19.00
419.00 x 25% = (104.75)
Gain / (Loss) on Investment 4.75

Notes 2

Gain/ (Loss) on Virtual Sales of Investment (Puma Bhd)

RM 'Million
Proceeds [ 25% x 400 Shares x RM1.40 ] 140.00
Cost 100.00
RP b/f - Post Acquisition [ 12 + 6/12(12) ] - 0 19.00
Profit for 6 month in 2016 [ 6/12(12) ] 6.00
25.00 x 25% = 6.25
Carrying Amount (106.25)
Gain on Investment (Notes 1) 4.75
Gain/ (Loss) 38.5

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 Group Project FAR610

f) Prepare the Consolidated Statement of Changes in Equity (extract) of Tiger Bhd. for the year ended
31 December 2016 showing the group retained profit and non-controlling interest (NCI).

Consolidated Statement of Changes In Equity (Extract) of Tiger Bhd.

For The Year Ended 31 December 2016
GRP NCI
Working
RM' Million RM' Million
Bal b/d 500.00 -
Acquisition during the year (Lions) - 923.20
Acquisition during the year (Cheetah) - 800.00
Acquisition during the year (Puma) - 170.00
6% Preferences Shares (Cheetah) - 400.00

+ Profit For The Year Ended 127.75 69.80

(-) Appropriations
Ordinary Dividend W2 : W3 (14.80) (10.75)
Preference Dividend W4 : W5 (25.20) (24.00)

Disposal of NCI Lions - (944.00)

Bal c/d
587.75 1,384.25

RM' Million
Working 2 (W2)
Ordinary Dividend (GRP)
Tiger - Ord Dividend 40 - 6%(420) 14.8

Working 3 (W3)
Ordinary Dividend (NCI)
Lions - Ord Dividend 40%(20) 8
Cheetah - Ord Dividend 25% [35 - 6%(400)] 2.75
10.75
Working 4 (W4)
Preference Dividend (GRP)
Tiger - Pref Dividend 6%(420) 25.2

Working 5 (W5)
Preference Dividend (NCI)
Cheetah - Pref Dividend 6%(400) 24

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 Group Project FAR610

g) Prepare the Consolidated Statement of Financial Position of Tiger Bhd. as at 31 December 2016.

Consolidated Statement of Financial Position of Tiger Bhd.

as at 31 December 2016
Notes RM 'Million
Non Current Assets
Property, Plant & [ 4320 + 2320 + 300 ] - 30 URP Machines + 3
3 6,923.00
Equipment Overdep. Machine - 90 URP Land + 100 ARR Land
Other Investment 200.00
4 Intangible Assets [ 75 + 58 ] 133.00
5 Goodwill [ 114.5 + 81 ] 195.50

Current Assets
6 Inventories [ 151 + 200 + 130 ] - 4.5 URP Inventories 476.50
7 Trade Receivables [ 137 + 272 + 60 ] - 60 409.00
8 Bill Receivables [ 81 + 96 + 40 ] – 6 Intercomp. Bill 211.00
9 Bank [ 99 + 137 + 12 ] + 1600 Proceeds of Disp. - 196 Acq 1,652.00

10,200.00

Financed By:
10 Share Capital [ 4420 + 1200 New Issuance Share ] 5,620.00
Reserves - GRP 587.75
- NCI 1,384.25
11 - SP [ 300 + 40 ] 340.00
Other Reserves 213.00

Non Current Liabilities

12 Long Term Loan [ 664 + 400 + 68 ] 1,132.00

Current Liabilities
13 Trade Payables [ 325 + 304 + 70 ] – 60 639.00
14 Bill Payables [ 112 + 69 + 30 ] – 6 Intercomp. Bill 205.00
15 Deposits [ 32 + 40 + 7 ] 79.00

10,200.00

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 Group Project FAR610

3) Property, Plant and Equipment

Land Plant Machineries Total

RM Million RM Million RM Million RM Million
At cost
2,050.00 3,270.00 2,938.00 8,258.00
Accumulated depreciation
- (660.00) (675.00) (1,335.00)
Acquisition
390.00 - 130.00 520.00
Disposal
(300.00) - (200.00) (500.00)
Revaluation
100.00 - - 100.00
Unrealised profit
(90.00) (30.00) (120.00)
Balance as at 31 Dec 2016
2,150.00 2,610.00 2,163.00 6,923.00

4) Intangible Assets

Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million
Research & Development 25.00 50.00 75.00
Patent 28.00 30.00 58.00
Balance as at 31 Dec 2016 53.00 80.00 133.00

5) Goodwill

Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million
Goodwill 114.50 81.00 195.50
Balance as at 31 Dec 2016 114.50 81.00 195.50

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 Group Project FAR610

6) Inventories

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Inventories 151.00 200.00 130.00 481.00
Unrealised profit - (4.50) - (4.50)

Balance as at 31 Dec 2016

151.00 195.50 130.00 476.50

7) Trade Receivables

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Trade receivables 137.00 272.00 60.00 469.00
Inter-companies transaction - (60.00) - (60.00)
Balance as at 31 Dec 2016 137.00 212.00 60.00 409.00

8) Bill Receivables

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Bill receivables 81.00 96.00 40.00 217.00
Inter-companies transaction - - (6.00) (6.00)
Balance as at 31 Dec 2016 81.00 96.00 34.00 211.00

9) Bank

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Bank 99.00 137.00 12.00 248.00
Acquisition of additional shares - - (196.00) (196.00)
Proceed from disposal of shares 1,600.00 - - 1,600.00
Balance as at 31 Dec 2016 1,699.00 137.00 (184.00) 1,652.00

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 Group Project FAR610

10) Share Capital

Tiger Bhd Total

RM Million RM Million
Authorize share capital 8,000.00 8,000.00
Issued & paid up capital :
Ordinary shares of RM1 each 4,000.00 4,000.00
6% Cumulative preference share 420.00 420.00
Issuing new shares 1,200.00 1,200.00
Balance as at 31 Dec 2016 5,620.00 5,620.00

11) Share Premium

Tiger Bhd Total

RM Million RM Million
Share premium 300.00 300.00
Issuing shares 40.00 40.00
Balance as at 31 Dec 2016 340.00 340.00

12) Long-term Loan

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Long-term loan 664.00 400.00 68.00 1,132.00
Balance as at 31 Dec 2016 664.00 400.00 68.00 1,132.00

13) Trade Payables

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Trade payables 325.00 304.00 70.00 699.00
Inter-companies transaction (60.00) - - (60.00)
Balance as at 31 Dec 2016 265.00 304.00 70.00 639.00

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 Group Project FAR610

14) Bill Payables

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Bill payables 112.00 69.00 30.00 211.00
Inter-companies transaction (6.00) - - (6.00)
Balance as at 31 Dec 2016 106.00 69.00 30.00 205.00

15) Deposits

Tiger Bhd Cheetah Bhd Puma Bhd Total

RM Million RM Million RM Million RM Million
Deposits 32.00 40.00 7.00 79.00
Balance as at 31 Dec 2016 32.00 40.00 7.00 79.00

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 Group Project FAR610

h) Based on information available, prepare notes to the related-party transaction for the year ended 31
December 2016 in accordance with MFRS 124 Related Party Disclosures.

Related Party Transaction

Accordance to MFRS 124 Related Party Disclosure, it states that a related party transaction is a
transfer of resources, services or obligations between related parties, regardless of whether a price
is charged.

Whenever exist, related party transaction also includes transaction with entities that are controlled,
joint ventures or significantly influenced directly by any key management personnel or their close
family members

In addition to related party transaction and balances mentioned elsewhere in the financial statements,
set out below are significant related party transactions and balance which were carried out amongst
the related parties which involves Cheetah Bhd. and Puma Bhd. as subsidiaries to Tiger Bhd. on 31
December 2016. Meanwhile there is no share were acquired by Tiger Bhd. Thus it is considered as
unrelated company to Tiger Bhd.

Transaction
Intercompany Sales of Machines
Intercompany Sales of Goods
Disposal of Land
Undiscounted Bill Receivables
Dividend from subsidiary
Group Company
RM' Million RM' Million
- 130
- 120
- 390
[ 8 – ¼(20% x 40) ] - 6
[ 60%(20) + 75%(11) ] - 20.25

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 Group Project FAR610

 QUESTION 2
a) Explain the difference between control and joint-control. Provide one example of each in your
explanation.

Control

Control exist when an entity acquires control over another entity, the acquirer is called the holding
or parent entity and the acquiree is called the subsidiary. Together they form a group although both
the entities remain separate physically and legally. An investor determines whether it is a parent by
assessing whether it controls the investee. The investor controls the investee only if it has power over
the investee, exposure, or right, to variable returns from its involvement with the investee and the
ability to use its power over the investee to affect the amount of the investor’s return. For example,
an acquirer 60% of ordinary share of B. So, A has power to govern B because have more than 50%
voting right.

Joint control

Joint control exists where the parties contractually agree to share control and decisions about the
relevant activities of the joint arrangement have the unanimous consent of all the parties sharing
control. The parties have to access the extent to which the parties should act together to direct the
activities that significantly affect the returns of the joint arrangement. No single party controls the
arrangement on its own but a party to joint control can prevent the other parties from controlling the
arrangement. For example, A,B and C are parties to an arrangement where A has 40% voting power,
with B and C each having 30% voting power. The contractual agreement is at least 80% of voting
right are required to make decision about relevant activities or arrangement. All three have joint
control as all three have to agree on all decision.

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 Group Project FAR610

b) State your opinion on Sheela and Devi’s view. Discuss your opinion with reference to the relevant
MFRSs.

MFRS 10 is consolidated financial statement, MFRS 11 is joint Arrangement while MFRS 128
is investment in Associates and joint venture. In this case, Rajni BHD, Dehli Bhd and Madrass Bhd
get in a contractual agreement that bounds them into joint control over Bashaa Bhd. Joint control exist
where the parties contractually agree to share control and decisions about the relevant activities of the
joint arrangement have the unanimous consent of all the parties sharing control. Rajni Bhd cannot
apply acquisition method because in a joint arrangement no single party controls the arrangement
on its own. A party with joint control of an arrangement can prevent any of the other parties,
or a group of the parties, from controlling the arrangement. So in this case, since Raini Bhd cannot
control over Bashaa Bhd even it has highest interest in Bashaa which is 40%, Rajni Bhd has to use
equity method under MFRS 128. The investment in an associate that is initially recognise at cost and
the carrying amount is increased or decreased by the investors share of the post-acquisition profits or
lossess of the investee.

c) Provide any three (3) evidences (as mentioned in MFRS 128) to support the existence of significant
influence over an investee company.

MFRS 128 defines significant influence as power to participate in the financial and operating
policy decisions of the investee but not control or joint control of the policies.
An investor is presumed to have significant influence over the investee if the investor holds,
directly or indirectly, 20 percent or more of the voting power of the investee, unless it can be clearly
demonstrated that is not the case. On the other hand, if the investor holds less than 20 percent of the
voting power of the investee, it is presumed that the investor does not have significant influence, unless
such can be clearly demonstrated. Significant influence is evidenced by participation in the financial
and operating policy decisions of the investee but not control of those policies. An investor may
exercise significant influence in several ways usually by representation on the board of directors,
participation in policy making processes, material inter- company transactions, interchange of
managerial personnel or dependence on technical information.

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 Group Project FAR610

d) I. Compute the goodwill/ bargain purchase on acquisition of Rose’s shares on 1 January 2016.

RM'000 RM'000
Cost of investment 700.00
Net Assets of Rose at 1 January 2016
Ordinary share capital 1,200.00
Retained profit 400.00
Fair value adjustment: ARR 200.00
1800.00
(720.00)
x 40%
Bargain Purchase (20.00)

II. Calculate the carrying amount of investment in Rose Sdn. Bhd. in the Flowers Bhd’s book as at
31 December 2016

RM'000 RM'000
Retained Profit at 31 December 2016 900.00
(-) Pre Retained Earning (400.00)
500.00
Post Retained Earning 200.00
x 40%

Asset Revaluation Reserve at 31 December 2016 600.00

(-) Pre ARR (200.00)
400.00
Post ARR 160.00
x 40%

RM'000
Cost of Investment 700.00
(-) Retained Profit 200.00
(-) Asset Revaluation Reserve 160.00
1,060.00
(-) Dividend 31 December 2016 (100 x 40%) (40.00)
(-) Bargain Purchase (20.00)
Carrying amount at 31 December 2016 1,000.00

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