QUESTION 3

a) the following steps should be taken to account for Blue Bhd's acquisition of
Klise Bhd on January 1, 2018:

Blue Bhd's RM20 million cash consideration for acquiring an 80% interest in Klise Bhd
should be recorded as an investment in Klise Bhd. The excess value of Klise Bhd's
land and building should be recorded as part of the acquisition cost. The building's
remaining useful life should also be documented as part of the acquisition.

Goodwill is an intangible asset that represents the excess of the acquisition cost over
the fair value of the acquired company's net assets. In this case, the RM6 million in
goodwill should be recorded on Blue Bhd's balance sheet as an intangible asset.

Klise Bhd's non-controlling interest should be valued at its fair value on the date of
acquisition. The non-controlling interest's fair value can be calculated by subtracting
the fair value of the controlling interest (80% ownership) from the total fair value of
Klise Bhd.

The RM2.4 million goodwill impairment should be recorded on Blue Bhd's balance
sheet as a reduction in the value of the goodwill intangible asset.

The disposal of 50% of Blue Bhd's interests in Klise Bhd for RM10 million should be
recorded as a reduction in Klise Bhd's investment, with the resulting gain or loss
recognized in the income statement. The fair value of Blue Bhd's remaining shares in
Klise Bhd should also be recalculated and recorded as an adjustment to the Klise Bhd
investment. When Blue Bhd disposal 50% of its interest in Klise Bhd, it must calculate
the gain or loss on the transaction. It must calculate the carrying value of the disposed-
of shares and compare it to the proceeds received from the disposal.
The carrying amount of the disposed-of shares can be calculated as follows:

Carrying amount of disposed-of shares = Cost of disposed-of shares - Accumulated

depreciation/amortization

The cost of the shares being disposed of is the RM20 million paid for the 80% interests
in Klise Bhd. The accumulated depreciation/amortization will be determined by the type
of assets acquired as part of the transaction.

Klise Bhd's land and building had an excess value of RM1.2 million and RM2 million,
respectively, at the date of acquisition, so there will be no accumulated depreciation
on these assets. However, the building has a remaining useful life of 15 years as of
the acquisition date, so it must be depreciated over this period.

Klise Bhd acquired goodwill worth RM6 million, which has been depreciated by RM2.4
million over a four-year period from 1 January 2018 to 31 December 2021. As a result,
the remaining goodwill is RM3.6 million.

The carrying amount of the disposed-of shares can now be calculated as

follows:

Carrying amount of disposed-of shares = RM20 million - (RM3.6 million + building

depreciation)

The building's depreciation will be determined by the depreciation method used and
the building's remaining useful life. If the straight-line method is used and the building
has an 11-year remaining useful life (15 years - 4 years), the annual depreciation would
be (RM2 million / 15 years) x 4 years = RM0.53 million. The total depreciation on the
building over the four years would be RM0.53 million multiplied by 4 years = RM2.12
million.

When this value is entered into the formula above, the carrying amount is RM20 million
- (RM3.6 million + RM2.12 million) = RM14.28 million.
b) To calculate the gain or loss on the disposal, we must compare the carrying value of
the shares being disposed of to the proceeds received from the disposal, which were
RM10 million.

If the carrying amount is greater than the proceeds, the disposal will result in a loss
and there will be a gain on disposal if the carrying amount is less than the proceeds.

In this case, the carrying amount of RM14.28 million exceeds the proceeds of RM10
million, resulting in an RM4.28 million loss on disposal. This loss should be recorded
in the income statement in the period of disposal.

The non-controlling interest should be valued at its fair value on the date of disposal.
The fair value of Blue Bhd remaining shares in Klise Bhd was RM6 million, so the non-
controlling interest is 50% x RM6 million = RM3 million.

The difference between the fair value of the non-controlling interest and it is carrying
amount should be recorded as a gain or loss on disposal in the income statement. This
is because the carrying amount of the non-controlling interest is unknown. Determining
the gain or loss on the disposal of the non-controlling interest is impossible.
c) To calculate the gain or loss on the sale of the shares, we must first determine the
carrying amount of the shares on the date of sale.

The carrying amount of the shares on the date of acquisition was RM20 million,
representing the cash consideration paid for the 80% interest in Klise Bhd. Klise Bhd's
fair value of its land and building was RM3.2 million (RM1.2 million excess value of
land + RM2 million excess value of building), which was recognized in the consolidated
statement of financial position as a revaluation surplus. As a result, the carrying value
of the shares on the date of acquisition is RM23.2 million (RM20 million + RM3.2
million).

As a result, the carrying value of the shares on the date of disposal is RM26.8 million
(RM23.2 million + RM3.6 million).

Klise Bhd's net assets on the date of disposal were RM16 million, and the fair value of
Blue Bhd's remaining shares in Klise Bhd was RM6 million. The carrying amount of the
disposed of 50% interest in Klise Bhd is RM22 million (50% x RM16 million + 50% x
RM6 million).

Thus, the gain on the sale of the shares is RM4.8 million (RM26.8 million - RM22
million).
QUESTION 4

A related party transaction, according to MFRS 124 Related Parties Disclosures, is a transfer
of resources, services, or obligations between a reporting entity and a related party, regardless
of whether a price is charged.

This is because Mawar Berhad is owned by the daughters of Tulip Berhad's CEO, the
transaction between Tulip Berhad and Mawar Berhad meets the definition of a related party
transaction.

A reporting entity is required by MFRS 124 to disclose information about its related party
transactions, including the nature of the related party relationship, the description of the
transactions, and the amount of the transactions. This includes disclosing that the transaction
was made with a related party, as well as the transaction's terms and conditions.

Furthermore, MFRS 124 requires reporting entities to disclose any changes in the nature of
the related party relationship as well as any changes in the terms and conditions of related
party transactions.

As a result, in this case, Tulip Berhad would be required to disclose the details of the
transaction with Mawar Berhad in its financial statements, including the fact that Mawar
Berhad is owned by the daughters of Tulip Berhad's CEO.