Solution Far450 UITM- Jan 2013

Suggested solution FAR450 – January 2013 Question 1 a. Goodwill on acquisition of Muffin Consideration transferred 20,000  + (60% x 100,000  x ½ x RM3)

RM’000 110,000

(40% x 116,000 )

NCI FV of net assets on d.o.a OSC Retained Profit Share Premium FV Adjustment Goodwill Impairment

46,400 156,400 100,000  12,000  2,000  2,000 

(116,000) 40,400 (20,200) 20,200 12 x 1/3 = 4 marks

b. Consolidated Consolidat ed Statement of Comprehensive Income for Cake Bhd Group for the year ending 30June 2012 

RM’000

Revenue (320,000+270,000) +(180,000x6/12) -40,000 Cost of Sales (110,000+70,000) +(70,000x6/12) -40,000 +4,800  Gross profit Investment income (3,000 - (2,500x80%)  - (1,000x80%) + 3,000)  Other operating expenses (140,000+113,000) +(29,000x6/12) - 400+1,000  Bargain purchase Profit before tax Taxation (20,000+30,000) +(25,000x6/12)  Profit after tax Other comprehensive income:  Loss on reduction of NCI  Total comprehensive income Profit after tax attributable to: Equity holders of parent NCI

640,000 (179,800) 460,200 3,200 (268,100) 6,400  201,700 (62,500) 139,200 W1(7,000) W1(7,000) 132,200



Total comprehensive income attributable to: Equity holders of parent NCI

119,760 W2 19,440 139,200 

112,760 19,440 132,200

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W1: Gain/loss on subsequent acquisition/ Reduction in NCI

RM’000

nd

Cons. trans on 2 acq Net assets on 2 nd acq. date OSC Share Premium FV Adjust. Retained Profit : b/f : CY (60,000 x 3/12)

48,800  100,000  2,000  2,000  90,000  15,000 

105,000 209,000 X 20%

Loss

(41,800) 7,000

W2: Profit after tax attributable to NCI Muffin Bhd Before 1/10/2011 Profit for the year 60,000 x3/12 x40%  After 1/10/2011 Profit for the year 60,000 x9/12 x20% Bun Bhd Profit for the year URP  Amortisation

56,000 x 6/12 2,000 x 6/12

28,000 (4,800)  (1,000)

RM’000

RM’000

6,000 9,000

15,000

22,200x20% 

4,440 19,440 48 x1/3 = 16 marks

c. Consolidated Statement of Changes in Equity for Cake Bhd Group for the year  ending 30 June 2012 RP NCI RM’000 RM’000 W3 111,600 W4 77,600 Balance as at 1 July 2011 Profit for the year   112,760 19,440 W5 42,600  Acquisition of subsidiary during the year  Reduction in NCI  (41,800) Transfer to general reserve (1,000)  Ordinary dividend (5,000)  (2.5x20% +1x20% ) (700) Balance as at 30 June 2012 218,360 97,140

RM’000

W3: Retained profit b/f  Cake Bhd: 85,000  – 20,200  Muffin Bhd: (90,000  - 12,000) x 60% W4:NCI b/f  Muffin Bhd OSC Retained Profit Share premium FV adjustment

64,800 46,800 111,600

RM’000 100,000  90,000  2,000  2,000  194,000

X40% 

77,600

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W5: Acquisition of Bun during the year  OSC 50,000 x RM2 General reserves Share premium FV adjustment Retained profit : b/f : CY 56,000 x 6/12

RM’000 100,000  3,000  2,000  10,000  70,000  28,000  213,000

X20% 

42,600 (24x1/3 = 8 marks)

d. If Cake Bhd recognised non-controlling interest at fair value,the goodwill shall be accounted for as follows: 1. Goodwill arising from acquisition of Muffin Bhd will be shared between parent and NCI since full goodwill is applied . 2. Impairment of goodwill will be written off according to the percentage of interest. 40% will be reducing the NCI of Muffin Bhd  and 60% will be written off against group retained profit.  3. The calculation of reduction in NCI on 2 nd acquisition will take into consideration the goodwill belonging to NCI  by writing off part of goodwill according to the decrease in the NCI percentage  (5x1= 5 marks) Question 2A a. Goodwill Berry 80% Consideration Transferred Direct 100,000  x 80%x RM3  Indirect NCI (20% x 100,000  x RM4) FV of net assets on d.o.a OSC Retained Profit Share Premium FV Adjustment: Equipment Plant Brand Goodwill Impairment

Cherry 78%

RM’000

RM’000

240,000

40,000  64,000 52,800 156,800

80,000 320,000

200,000  12,000  10,000 

80,000 x80% 22% x 60,000  x RM4

120,000  7,000 -

2,000  _6,000  (90,000x10%) 

(230,000) 90,000 (9,000) 81,000

5,000  _______ (132,000) 24,800

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Investment in Associate (Lychee) Consideration Transferred 40% x 22,500 xRM3.00 Share of post acquisition profit 2,000 x 6/12x40% URP – Inventory Impairment

1,000  x 40%

RM’000 27,000 400 27,400 (400) (2,000)  25,000 NCI Berry (20%)

RM’000

NCI NCI @ Acquisition date Investment in Cherry (80,000 x 20%) Impairment of goodwill Retained Profit – Berry Balanced b/d (25,000+10,000) -pre Post URP – Inv (3,000x50% x20/120 ) URP-Equip(30,000-26,000) Over depreciation Under depreciation (2,000/5 x 2yrs) Dividend payable (5%x200,000) Dividend receivable from Cherry (6,000 x 60%) Retained Profit – Cherry Balanced b/d (7,000+8,000) pre Post Under depreciation (5,000/5) Dividend payable(5% x 120,000)

80,000  (16,000)  (1,800) 

NCI Cherry (22%)

RM’000

GRP

RM’000

52,800  (7,200)



35,000  (12,000)  23,000 (250) (4,000)  1,000  (800) (10,000)  3,600  12,550

2,510 

15,000  (7,000)  8,000 (1,000)  (6,000)  1,000

Retained Profit – Grape Balanced b/d (30,000+16,000) URP Inventory Dividend payable (5% x 350,000) Dividend receivable : Berry (80% x 10,000) : Cherry (30% x 6,000) Share of profit in Lychee Impairment of investment in Lychee CSOFP

10,040 

220 

64,710

780

46,000  (400)  (17,500)  8,000  1,800  400  (2,000)  53,020 39,920

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Consolidated Statement of Financial Position for Grape Bhd Group as at 30 June 2012

RM’000

Non-current Assets Property, plant and equipment (251,000+210,000+130,000) +2,000 -800-4,000+1,000+5,000 -1,000  Intangibles-Brand Goodwill (81,000 + 24,800) Investment in Associates Current Assets Inventory (25,000+23,000+9,000) -250  Account Receivable (20,000+19,000+7,000) Bank (14,000+12,000+6,000) -27,000  Cash in transit (2,000 +1,000 )

593,200 6,000  105,800  25,000 

56,750 46,000  5,000 3,000 840,750

Equity Ordinary share @RM2.00 each Share Premium Retained Profit  Non Controlling Interest 

350,000  50,000  39,920 117,730

Non-current Liabilities 8% Debentures (140,000+77,000)

217,000 

Current Liabilities  Account Payables (14,000+20,000+12,000) Ordinary Dividend Payable : Parent : Non-controlling Interest (2,000 +600)

46,000  17,500  2,600 840,750

( 87 x 1/3 = 29 marks) Presentation: 1 mark Total: 30 marks b) 4 conditions the parent can be exempted from preparing consolidated financial statement 1. The parent itself is a wholly owned subsidiary, or is a partially owned subsidiary and the other owner are informed and do not object to the parent not presenting consolidated Financial Statement,  2. The parent ’s debt or equity instruments are not traded in a public company,



3. The parent is not in the process of issuing in a public market its debt or equity instrument by filing its financial statements with the regulatory authorities like the Securities Commission; and 4. The ultimate or any other intermediate parent produces consolidated financial statements  (4 x 1 = 4 marks)

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2B. Grape can no longer be regarded as having significant influence since it has lost its seat on the board.  Therefore in 2013, investment in Lychee will no longer be equity accounted for.  However, Grape will account for its investment in Lychee at its carrying value and accounted for under FRS 139.  3 x 1 = 3 marks

Question 3 a. 3 situations are as follows: 1. Shears is an extension of the parent’s operations. Shears obtain all materials from the parent and sells them and remits the proceeds to the parent. 2. Sales prices are primarily responsive to exchange rate changes in the short term and are determined primarily by competitive forces. 3. Production costs and operating expenses are obtained primarily from parent entity 4. High volume of intragroup transactions. 5. Financing primarily from parent. (Any 3, 1 mark each = 3 marks) b. Land Machine  Accumulated depreciation Inventory Monetary assets Monetary liabilities

SL million 200 80 (20) 30 60 (80) 270

Rate 0.95 0.90 0.90 0.80 0.85 0.85

RM million 190 72 (18)  24 51 (68)  251

200 40 30 270

0.95 0.95 bal. fig.

190 38 23 251

Ordinary shares Retained earnings: pre : post

Post acquisition reserves  Less: Retained profit for the year Exchange difference

RM million 23 (17)  6

21 x 1/3 = 7 marks

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Question 4 Furher Berhad Group Consolidated Statement of Cash Flow for the year ended 30 June 2012

RM’000 Cash flows from operating activities Net profit before tax  Adjustments for: Depreciation Impairment of goodwill Investment income Interest expense Gain on disposal of equipment Operating profit before working capital changes Increase in inventory Decrease in trade receivables Decrease in trade payables Cash generated from operations Interest paid Tax paid Net cash from operating activities Cash flows from investing activities Purchase of property, plant and equipment Proceeds from sale of equipment  Acquisition of subsidiary -21,100+2,260 Investment income Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Issue of 10% debenture Dividend paid to non controlling interest Dividend paid Net cash in financing activities Net decrease in cash and cash equivalents √ Cash and cash equivalent at the beginning of period Cash and cash equivalent at end of period

(49,798) 9,800 (18,840) 222

RM’000 28,066

√

13,982 1,888 (222) 3112 (2,872) 43,954 (658) 12,174 (1,368) 54,102 (3,112) (7,030) 43,960

√ √√ √ √ √ √√ √√ √√ √ √√

√√√√√ √ √√ √ (58,616)

6,000 10,538 (10,724) (1,334)

√√√ √ √√√ √√√ 4,480 (10,176) 2,984 √√ (7,192) 38√ x ½ = 19 marks Presentation: 1 mark

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Workings Taxation payable

RM’000 Tax paid c/f

√ 7,030 b/f 6,164 SoCI

RM’000 5,652 √ 7,542

PPE

RM’000 b/f  Acq of sub Revaluation Additions

163,028 √ 22,500 √12,250 √49,798

Depreciation Disposal c/f

RM’000 √ 13,982 √ 6,928 226,666

 ARR

RM’000 c/f

20,302

RM’000 b/f PPE

10,502 9,800

OSC

RM’000 c/f

RM’000

b/f  Acq of subs 57,522 New issue

45,522 √ 10,000 √ 2,000

Share premium

RM’000 c/f

24,036

RM’000 b/f New issue

20,036 √ 4,000

Goodwill

RM’000 b/f  Acq of S

600 √6,444

Impairment c/f

RM’000 √1,888 5,156

Non controlling interest Div pd c/f

RM’000

RM’000

10,724

9,179 √√ 6,164 √ 6,654

b/f  Acq of S 11,273 TCI Retained earnings

RM’000 Div payable c/f

2,274 79,995

RM’000 b/f SoCI

65,949 √√ 16,320

Dividend payable

RM’000 Div pd c/f

1,334 6,620

RM’000 b/f RP √

5,680 2,274

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