FAR610/620 – JULY 2022

SUGGESTED SOLUTION JULY 2022

QUESTION 1 (PART A)

PART A

a) Goodwill or bargain purchase on acquisition

Mahang Bhd Goodwill NCI

CT 63,000-9,000 54,000√√
NCI 20%√x62,500 12,500 12,500
66,500
FVNA @ DOA
OSC 60,000√
RE 2,000√
OCE 2,000√
ARR (1,500) √ 62,500
Goodwill 4,000
Less: Impairment√ (200 + 100) (300)
To CSOFP 3,700

PSC 9,000√

Karangan Bhd
CT 60,000√-(20%x10mxRM2) √ 56,000
NCI 40%√x79,700 31,880 31,880
87,880
FVNA @ DOA
OSC 70,000√
RE 4,700√
OCE 5,000√ 79,700
To CSOFP 8,180

PSC 10,000 x 20% x RM2 4,000√

Less: PSC (10,000 x 20%) (2,000) √ 8,000√
To CSOFP 2,000

Dublin Bhd
CT 24,000√
FVNA @ DOA
OSC 60,000√
RE 3,500√+1625√ = 5,125
(6,500x3/12)
OCE 1,400√
66,525 x 40%√ 26,610
Bargain Purchase 2,610

(24 x ½ = 12 marks)
b) Gain or loss on disposal of shares in Mahang Bhd

Proceeds 20%√x(80%x60m)√
x RM1.08√ 10,368
FVNA @ DOD

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 FAR610/620 – JULY 2022

OSC 60,000√
RE 2,800√
OCE 2,000√
ARR (1,500) √
63,300x16%√ 10,128 10,128
Gain 240

(8 x ½ = 4 marks)

c) Consolidated Statements of Profit or Loss of Kulim Bhd group for the year ended 31
December 2021.
RM’000
Revenues (36,000+30,000+25,900) √-1,800√ 90,100
Cost of Sales (8,300+6,600+5,900) √-1,800√ +270 √ (19,270)
Gross Profit 70,830
Investment income (300+400+440)√ -240√ + 450√ + 100√ - 900
450√-100√
Other income (500+750+100) √ 1,350
Administrative expenses (12,200+9,000+6,400) √ (27,600)
S&D expenses (5,700+2,600+4,000) √ (12,300)
Bargain purchase - AC 2,610√
Impairment (100) √
Depreciation-plant 1,500/10 years 150√
Share of profit in AC (6,500x9/12) √x40%√ 1,950
URP (A) (50%x400x20%) √x40%√ (16)
Finance cost (1,900+2,050+1,240) √ (5,190)
Profit Before Tax 32,584
Taxation (2,200+2,800+2,300) √ (7,300)
Profit After Tax 25,284
Other Comprehensive Income
Gain on disposal √ 240
Revaluation surplus-land 700√
Total Comprehensive Income 26,224

Profit after tax attributable to: √ RM’000

The equity holders of the parent 19,456
The Non-Controlling Interest (W1) 5,828
25,284

Total Comprehensive Income attributable to:

The equity holders of the parent 20,396
The Non-Controlling Interest 5,828
26,224

W1 Mahang Bhd Karangan Bhd

RM’000 RM’000
Net profit 8,100√ 6,600√
-/+) Depreciation 150 √
-) URP (270) √
-) PS Dividend (900) √ (500) √
7,350 5,830

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 FAR610/620 – JULY 2022

NCI % 36% √ 2,646 40%√ 2,332

Add back PSD 50% √ 450 80%√ 400
3,096 2,732

(36 x ½ = 18 marks)

d) Consolidated Statement of Changes in Equity of Kulim Bhd group for the year ended
31 December 2021.

GRE NCI ARR OCE

RM’000 RM’000 RM’000 RM’000
Balance b/f W2/W3 6,560 21,690 - 3,000
Profit for the year√ 19,456 5,828 - -
Acquisition during the - 31,880√ - -
year 8,000√
Revaluation surplus - - 700 -
Changes in shareholding - 10,128√ - 240
PSD (500) √ (450) √ - -
(400) √
Balance c/f 25,516 76,676 700 3,240

W2 GRE W3 NCI
Kulim Bhd 6,000√
-) Impairment (200) √
5,800
Mahang Bhd 2,800√ 12,500√
-) Pre (2,000) √
+) Dep 150√
950 760 190
PSC-Mahang Bhd 9,000√

6,560 21,690

(14 x ½ = 7 marks)

e) Consolidated Statement of Financial Position of Kulim Bhd group as at 31 December

2021.

RM’000
Property, Plant & Equipment (49,000+80,000+78,900)√- 205,400
1,500√+(150 x 2 = 300)√ -
2,000√+700√

Investment Property√ 2,000

Intangibles (2,000+5,000+6,000) 26,880
√+3,700√+8,180√+2000√
Investment in Dublin Bhd√ W4 28,304
Other investment (12,000+30,000+26,000) √ 68,000
Inventories (2,300+3,300+4,200) √ - 270 √ 9,530

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Trade Receivables (1,800+2,500+5,320) √ - 810√ 8,810

Bills Receivables (100+100+300) √-300√ 200
Bank (3,100+2,100+5,000) √+10,368√ 20,568
CIT (1,500-1,400) 100√
TOTAL 369,792

OSC 149,300√
PSC 10,000√
Group Retained Earnings 25,516
Group Revaluation Reserve √ 700
Other Components of Equity 3,240
Non-Controlling Interest 76,676
Debenture (35,000+24,100+20,000) √ 79,100
Bank Loan (7,500+5,000+7,000) √ 19,500
Trade Payables (1,200+1,600+2,300) √- 810√ 4,290
Bills Payables (300+120) √-300√ 120
Dividend payables (500+900+500) √-450√-100√ 1,350
TOTAL 369,792

W4 RM’000
Original cost 24,000√
Share of profit 1,950√
-) URP (16) √
Bargain Purchase 2,610√
-) Dividend (240) √
28,304

(38 x ½ = 19 marks)
(Total: 60 marks)

PART B

(i)
MFRS 10 states that power arises when the investor holds, directly or indirectly the majority
of the voting rights.√ However, investors may have power even though it holds less than the
majority of voting rights. One of the situations that permit this to occur is when the potential
rights exist.√ Therefore, Radiant Age Berhad, which has a control of only 30%, which is less
than the majority of voting rights, has controlled Glitter Berhad on 1 January 2022.√ This is
because the option gives rise to potential rights if exercised √ , which may increase the
investor's voting power. Even the option that can be exercised in 40 days time did not stop the
investor from having the ability to direct the relevant activities of the investee√.

(5 marks)

(ii)
Pluto is an associate company√ of Venus Bhd because the shares acquired (30%) are more
than 20% but less than 50%
Any inter-company balances that arise from the transactions with associates must not be
eliminated on consolidation √ because the items in the statement of financial position of the
associate are not consolidated. √

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 FAR610/620 – JULY 2022

A loan from Pluto Bhd √ should be separately disclosed in the consolidated financial
statement under liability. √
(5 marks)

(iii)

- Matrix Bhd is an associate of Prestige (25% equity interest) √, therefore the financial
statement of Matrix Bhd will not be consolidated √
- the cost of investment in Matrix Bhd is initially recognised at cost √ and the carrying
amount is increased or decreased by the Prestige’s share of the post-acquisition profit
and impairment of goodwill (RM3,000) √

- the carrying amount of investment in Matrix Bhd is disclosed as a non-current asset √

-
(5 marks)
(Total: 15 marks)

QUESTION 2

Q2a)
When a subsidiary is acquired during the year,
- the purchase consideration may include cash, which means there is a cash outflow.√
- The asset of the subsidiary may include cash, which means there is a cash inflow
- The cash consideration paid will be set off against the cash balance (if any) in the
subsidiary on the acquisition date. √
- The net cash flow from the transaction will be disclosed as cash flow from investing
activity ( the acquisition of a subsidiary) .√
- Any cash dividend received from the subsidiaries by the parent is not disclosed in the
statement of cash flow.√
- Dividend paid to NCI will be disclosed as a cash outflow from financing activities .√

5 marks

Q2 b)Pearl Bhd

Consolidated statement of cash flows for the year ended 31 December 2021
Cash Flows from Operating Activities
Net Profit before tax 352,500 √
Adjustment

Depreciation on PPE 74,700√√√√

Impairment on goodwill 23,750√√
Impairment on intangible assets 1,600√√
Impairment on AC 5,600√
Finance cost 9,000√
Gain on sales of land (20,100)√
Share of profit of associate (99,900)√
347,150
Changes in working capital
Increase in Inventories (26,500) √√
Inc inTrade and other receivable (34,200) √√

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Dec inTrade and other payable (1,800) √√

Cash generated from operation 284,650
Interest paid (15,000) √√
Tax paid (84,000) √√
Net cash inflow from operating activities 185,650 (22√

Cash Flows from investing activities

Acquisition of PPE (52,800) √
Acquisition of Intangible assets (patent) (25,000) √
Proceed from sales of Land 34,800√
Acquisition of Subsidiary - Gold Bhd (2,000) √
Dividend income from AC 28,300√√ (6√
Net Cash inflow from investing activities (16,700)

Cash Flows from Financing activities

Repayment of long term borrowing (10,000) √√
Dividend paid to shareholders (66,000) √√
Dividend paid to NCI (53,200) √√
Net cash inflow from financiang
activities (129,200) (6√
Net increase in cash and cash equivalent√ 39,750 √
Cash and cash equivalent at the beginning 77,250 √√
Cash and cash equivalent at the end 117,000 √√ (6√

40√ x ½ = 20 marks

Working: Cash and cash equivalent 1/1/2020 31/12/2020

RM'000 RM'000
ST investment 52,500 79,500
Bank 24,750 37,500
77,250 117,000

Working: Goodwill

Acquisition of Gold Bhd RM'000 RM'000

CT - Cash 2,000
OS (RM2 x 5 million) 10,000 12,000
NCI (20% x 12,500) 2,500
14,500
- FV of NA (Gold) (12,500)
Goodwill 2,000

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 FAR610/620 – JULY 2022

Workings:
PPE Long Term Borrowing

Bal b/f 504,000 Bal c/f 700,800 Bal c/f 69,000 √ Bal b/f 78,000
Disposal -
Bank 52,800 √ Land 14,700√ Bank 10,000 Sub 1,000 √

OSC 225,500 √ Depreciation 74,700

Sub- acq 7,900√

OSC Retained profit

Bal c/f 646,500 Bal b/f 411,000 Bal c/f 420,000 Bal b/f 279,600

Sub - acq 10,000 Dividend 74,400 PAT 214,800

PPE 225,500

Goodwill Dividend payable

Bal b/f 78,750√ Bal c/f 57,000 Bal c/f 61,800 Bal b/f 53,400√

Sub -acq 2,000√ Impairment 23,750 Bank 66,000 RP 74,400√

Intangible Assets NCI

Bal b/f 72,000√ Bal c/f 95,400 Bal c/f 63,000 Bal b/f 55,500
bank - Bank -
patent 25,000 √ Impairment 1,600 Dividend 53,200 Sub 2,500 √

PAT 58,200√

Interest payable

Bal c/f 13,500 Bal b/f 19,500 √ Inventories

Bank 15,000 SOPL 9,000√ Bal b/f 136500√ Bal c/f 165000
Sub 2000√
Bank(Inc) 26500
Disposal of Land

Land 14,700 √ Bank 34,800 Trade & Other receivable

SOPL 20,100 √ Bal b/f 90000√ Bal c/f 129000

sub 4800√
Bank (Inc) 34200

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 FAR610/620 – JULY 2022

Tax payable

Bal c/f 37,500 Bal b/f 42,000√ Trade & Other Payable

Bank 84,000 SOPL 79,500√ Bal c/f 120900 Bal b/f 121500√
Bank (dec) 1800 sub 1200√
122700 122700

Investment in AC

Bal b/f 102,000 Bal c/f 168,000

Share of
profit 99,900√ impairment 5,600√
Bank -
Dividend 28,300

END OF SUGGESTED SOLUTION