Suggested solution FAR450 January 2013 Question 1 a.

. Goodwill on acquisition of Muffin Consideration transferred 20,000 + (60% x 100,000 x x RM3) NCI FV of net assets on d.o.a OSC Retained Profit Share Premium FV Adjustment Goodwill Impairment (40% x 116,000) 100,000 12,000 2,000 2,000 RM000 110,000 46,400 156,400

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

b. Consolidated Statement of Comprehensive Income for Cake Bhd Group for the year ending 30June 2012 RM000 Revenue (320,000+270,000) +(180,000x6/12) -40,000 640,000 Cost of Sales (110,000+70,000) +(70,000x6/12) -40,000+4,800 (179,800) Gross profit 460,200 Investment income (3,000 - (2,500x80%) - (1,000x80%) + 3,000) 3,200 Other operating expenses (140,000+113,000) +(29,000x6/12) - 400+1,000 (268,100) Bargain purchase 6,400 Profit before tax 201,700 Taxation (20,000+30,000) +(25,000x6/12) (62,500) Profit after tax 139,200 Other comprehensive income: W1(7,000) Loss on reduction of NCI 132,200 Total comprehensive income Profit after tax attributable to: Equity holders of parent NCI Total comprehensive income attributable to: Equity holders of parent NCI

119,760 W2 19,440 139,200 112,760 19,440 132,200

W1: Gain/loss on subsequent acquisition/ Reduction in NCI Cons. trans on 2nd acq Net assets on 2nd acq. date OSC Share Premium FV Adjust. Retained Profit : b/f : CY (60,000 x 3/12) RM000 48,800 100,000 2,000 2,000 90,000 15,000 105,000 209,000 X 20%

Loss W2: Profit after tax attributable to NCI Muffin Bhd Before 1/10/2011 Profit for the year 60,000x3/12x40% After 1/10/2011 Profit for the year 60,000x9/12x20% Bun Bhd Profit for the year URP Amortisation 56,000x 6/12 2,000 x 6/12

(41,800) 7,000

RM000 6,000 9,000

RM000

15,000

28,000 (4,800) (1,000) 22,200x20%

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

c. Consolidated Statement of Changes in Equity for Cake Bhd Group for the year ending 30 June 2012 RP NCI RM000 RM000 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 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 RM000 100,000 90,000 2,000 2,000 194,000 RM000 64,800 46,800 111,600

X40%

77,600

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 RM000 100,000 3,000 2,000 10,000 70,000 28,000 213,000

X20%

42,600 (24x1/3 = 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 2nd acquisition will take into consideration the goodwill belonging to NCI by writing off part of goodwill according to the decrease in the NCI percentage (5x1= 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 200,000 12,000 10,000 2,000 _6,000 (230,000) 90,000 (90,000x10%) (9,000) 81,000 5,000 _______ (132,000) 24,800 Cherry 78% RM000 240,000 80,000 320,000 80,000x80% 22% x 60,000 x RM4 120,000 7,000 RM000 40,000 64,000 52,800 156,800

Investment in Associate (Lychee) Consideration Transferred 40% x 22,500xRM3.00 Share of post acquisition profit 2,000 x 6/12x40% URP Inventory Impairment 1,000 x 40%

RM000 27,000 400 27,400 (400) (2,000) 25,000 NCI Berry (20%) RM000 80,000 (16,000) (1,800) 35,000 (12,000) 23,000 (250) (4,000) 1,000 (800) (10,000) 3,600 12,550 15,000 (7,000) 8,000 (1,000) (6,000) 1,000 2,510 10,040 NCI Cherry (22%) RM000 52,800 GRP RM000 (7,200)

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 (2,000/5x 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)

220

780

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

64,710

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

Consolidated Statement of Financial Position for Grape Bhd Group as at 30 June 2012 RM000 Non-current Assets Property, plant and equipment 593,200 (251,000+210,000+130,000) +2,000-800-4,000+1,000+5,000-1,000 Intangibles-Brand 6,000 Goodwill (81,000 + 24,800) 105,800 Investment in Associates 25,000 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) Equity Ordinary share @RM2.00 each Share Premium Retained Profit Non Controlling Interest Non-current Liabilities 8% Debentures (140,000+77,000) Current Liabilities Account Payables (14,000+20,000+12,000) Ordinary Dividend Payable : Parent : Non-controlling Interest (2,000+600)

56,750 46,000 5,000 3,000 840,750 350,000 50,000 39,920 117,730 217,000 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 parents 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)

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 parents 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) 270 200 40 30 270 RM million 23 (17) 6 Rate 0.95 0.90 0.90 0.80 0.85 0.85 0.95 0.95 bal. fig. RM million 190 72 (18) 24 51 (68) 251 190 38 23 251

Ordinary shares Retained earnings: pre : post Post acquisition reserves Less: Retained profit for the year Exchange difference

21 x 1/3 = 7 marks

Question 4 Furher Berhad Group Consolidated Statement of Cash Flow for the year ended 30 June 2012 RM000 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 RM000 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 (49,798) 9,800 (18,840) 222 (58,616) 4,480 (10,176) 2,984 (7,192) 38 x = 19 marks Presentation: 1 mark

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

Workings Taxation payable RM000 7,030 b/f 6,164 SoCI RM000 5,652 7,542

Tax paid c/f

b/f Acq of sub Revaluation Additions

PPE RM000 163,028 Depreciation 22,500 12,250 Disposal 49,798 c/f ARR RM000 b/f 20,302 PPE OSC RM000 b/f Acq of subs 57,522 New issue Share premium RM000 b/f 24,036 New issue Goodwill RM000 600 Impairment 6,444 c/f Non controlling interest RM000 10,724 b/f Acq of S 11,273 TCI Retained earnings RM000 2,274 b/f 79,995 SoCI Dividend payable RM000 1,334 b/f 6,620 RP

RM000 13,982 6,928 226,666 RM000 10,502 9,800 RM000 45,522 10,000 2,000 RM000 20,036 4,000 RM000 1,888 5,156 RM000 9,179 6,164 6,654 RM000 65,949 16,320 RM000 5,680 2,274

c/f

c/f

c/f

b/f Acq of S

Div pd c/f

Div payable c/f

Div pd c/f