EXERCISE ON CSOFP

Investment in Joint Arrangement and Associates

Below are the summarised statements of financial position for three companies as at 31 March
2011.

Paloma Bhd Fuego Bhd Delmara Bhd

RM million RM million RM million
Assets
Property, plant and equipment 954 560 480
Investments 776 80 -
Inventory 284 320 240
Trade receivables 190 176 100
Cash and bank 16 44 20
2,220 1,180 840

Equity and liabilities

Ordinary shares of RM1 each 1,200 290 200
Retained profits 260 520 480
10% loan notes 360 40 -
Current liabilities 400 330 160
2,220 1,180 840

Additional information:

1. Investment of Paloma Bhd in Fuego Bhd:

On 1 April 2009, Paloma Bhd acquired 232 million shares in Fuego Bhd for an
immediate cash payment of RM420 million and issued at par one 10% RM100 loan
note for every 200 shares acquired. Fuego Bhd’s retained profits at the date of
acquisition were RM240 million.

On 1 April 2009, the fair value of land of Fuego Bhd was RM1 million more than it
carrying value of RM5 million. No adjustments have been made in the books of Fuego
Bhd regarding the fair value adjustment. This land still remains in Fuego Bhd as at 31
March 2011 and on that date the fair value of the land was RM6.4 million.

Paloma Bhd’s policy is to value non-controlling interests at their fair values. The
directors of Paloma Bhd assessed the fair value of the non-controlling interest in Fuego
Bhd at the date of acquisition to be RM130 million.

2. Investment of Paloma Bhd in Delmara Bhd:

On 1 October 2010, Paloma Bhd acquired 60 million shares in Delmara Bhd in

exchange for 150 million of its own shares. The market value of Paloma Bhd’s shares
at the date of this share exchange was RM1.60 each.

3. In the post-acquisition period, Delmara Bhd sold goods to Palma Bhd for RM30 million.
Delmara Bhd made a profit of RM2 million on these sales. One-quarter of these goods
was still in the inventory of Paloma Bhd at 31 March 2011.

4. On 1 January 2010, Fuego Bhd sold a plant to Paloma Bhd at a profit of RM1.2 million.
The remaining life of the plant on that date was 4 years. The group policy is to

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 depreciate all plant using straight line method providing a full depreciation in the year
of purchase and none in the year of disposal.

5. Trade receivable of RM10 million and RM3 millions of Paloma Bhd are receivable from
Fuego Bhd and Delmara Bhd respectively.

6. Delmara Bhd’s profit is subject to seasonal variation. Its profit for the year ended 31
March 2011 was RM200 million. RM40 million of this profit was made from 1 April 2010
to 30 September 2010.

7. None of the companies have paid any dividends for many years.

Required:

Prepare the Consolidated Statement of Financial Position of Paloma Bhd Group as at 31

March 2011.