Solution Far450 UITM- Jan 2013

Suggested solution Suggested solution FAR450

FAR450 – – January 2013January 2013 Question 1

Question 1 a.

a. Goodwill Goodwill on on acquisition acquisition of of MuffinMuffin Consideration transferred Consideration transferred

RM’000

RM’000

20,000 20,000 + (60%+ (60%x 100,000x 100,000x ½x ½x RM3x RM3) ) 110,000110,000 NCI (40% NCI (40% x 116,000x 116,000) ) 46,40046,400 156,400 156,400 FV of net assets on d.o.a

FV of net assets on d.o.a

OSC 100,000

OSC 100,000

Retained

Retained Profit Profit 12,00012,000 Share

Share Premium Premium 2,0002,000 FV FV Adjustment Adjustment 2,0002,000 (116,000)(116,000) Goodwill 40,400 Goodwill 40,400 Impairment (20,200) Impairment (20,200) 20,200 20,200 12 12 x 1/3 = 4 marksx 1/3 = 4 marks b.

b. ConsolidatConsolidated Statement ed Statement of Comprehensive of Comprehensive Income for Income for Cake Bhd Cake Bhd Group for Group for thethe year ending 30June 2012

year ending 30June 2012 

RM’000

RM’000

Revenue (320,000+270,000) Revenue (320,000+270,000) +(180,000x6/12)+(180,000x6/12) -40,000-40,000 640,000640,000 Cost of Sales (110,000+70,000) Cost of Sales (110,000+70,000) +(70,000x6/12)+(70,000x6/12) -40,000-40,000+4,800+4,800 (179,800)(179,800) Gross

Gross profit profit 460,200460,200

Investment income (3,000

Investment income (3,000 - (2,500x80%)- (2,500x80%)- (1,000x80%)- (1,000x80%) + 3,000)+ 3,000)  3,2003,200 Other operating expenses (140,000+113,000)

Other operating expenses (140,000+113,000) +(29,000x6/12)+(29,000x6/12) - 400- 400+1,000+1,000 (268,100)(268,100) Bargain

Bargain purchase purchase 6,4006,400

Profit

Profit before before tax tax 201,700201,700

Taxation (20,000+30,000)

Taxation (20,000+30,000) +(25,000x6/12)+(25,000x6/12)  (62,500)(62,500) Profit

Profit after after tax tax 139,200139,200

Other comprehensive income: Other comprehensive income:  Loss on reduction of NCI

Loss on reduction of NCI  W1W1(7,000)(7,000)

Total comprehensive income

Total comprehensive income 132,200132,200

Profit after tax attributable to: Profit after tax attributable to: 

Equity

Equity holders holders of of parent parent 119,760119,760 NCI

NCI W2W2 19,44019,440

139,200 139,200 Total comprehensive income attributable to:

Total comprehensive income attributable to:  Equity

Equity holders holders of of parent parent 112,760112,760

NCI 19,440

NCI 19,440

132,200 132,200

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

RM’000

Cons. trans on 2nd acq 48,800

Net assets on 2nd acq. date

OSC 100,000 Share Premium 2,000 FV Adjust. 2,000 Retained Profit : b/f 90,000 : CY (60,000 x 3/12) 15,000 105,000 209,000 X 20% (41,800) Loss 7,000

W2: Profit after tax attributable to NCI Muffin Bhd

Before 1/10/2011

RM’000

RM’000

Profit for the year 60,000x3/12x40% 6,000  After 1/10/2011

Profit for the year 60,000x9/12x20% 9,000 15,000 Bun Bhd

Profit for the year 56,000x 6/12 28,000

URP (4,800) 

 Amortisation 2,000x 6/12 (1,000) 22,200x20% 4,440 19,440 48

c. Consolidated Statement of Changes in Equity for Cake Bhd Group for the year  ending 30 June 2012

RP NCI

RM’000 RM’000

Balance as at 1 July 2011 W3 111,600 W4 77,600

Profit for the year  112,760 19,440

 Acquisition of subsidiary during the year  W5 42,600

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 

RM’000

Cake Bhd: 85,000

 –

20,200 64,800 Muffin Bhd: (90,000- 12,000) x 60% 46,800 111,600 W4:NCI b/f  Muffin Bhd

RM’000

OSC 100,000 x1/3 = 16 marks

W5: Acquisition of Bun during the year 

RM’000

OSC 50,000 x RM2 100,000 General reserves 3,000 Share premium 2,000 FV adjustment 10,000 Retained profit : b/f 70,000 : CY 56,000 x 6/12 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 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 

(5x1= 5 marks) Question 2A a. Goodwill Berry 80% Cherry 78% Consideration Transferred

RM’000

RM’000

Direct 100,000x 80%x RM3 240,000 40,000 Indirect 80,000x80% 64,000 NCI (20% x 100,000x RM4) 80,000 22% x 60,000x RM4 52,800 320,000 156,800

FV of net assets on d.o.a

OSC 200,000 120,000 Retained Profit 12,000 7,000 Share Premium 10,000 -FV Adjustment: Equipment 2,000 Plant 5,000 Brand _6,000 (230,000) _______ (132,000) Goodwill 90,000 24,800 Impairment (90,000x10%) (9,000) 81,000

Investment in Associate (Lychee)

Consideration Transferred

RM’000

40%x 22,500xRM3.00 27,000 Share of post acquisition profit

2,000x 6/12x40% 400 27,400 URP

 –

Inventory 1,000 x 40% (400) Impairment (2,000)  25,000 NCI NCI Berry (20%)

RM’000

NCI Cherry (22%)

RM’000

GRP

RM’000

NCI @ Acquisition date 80,000 52,800

Investment in Cherry (80,000 x 20%) (16,000) 

Impairment of goodwill (1,800)  (7,200) 

Retained Profit – Berry

Balanced b/d (25,000+10,000) 35,000 -pre (12,000)  Post 23,000 URP

 –

Inv (3,000x50%x20/120) (250) URP-Equip(30,000-26,000) (4,000)  Over depreciation 1,000

Under depreciation (2,000/5x 2yrs) (800) Dividend payable (5%x200,000) (10,000)  Dividend receivable from Cherry

(6,000 x 60%) 3,600

12,550 2,510 10,040 Retained Profit – Cherry

Balanced b/d (7,000+8,000) 15,000 pre (7,000)  Post 8,000 Under depreciation (5,000/5) (1,000)  Dividend payable(5% x 120,000) (6,000)  1,000 220 780

Retained Profit – Grape

Balanced b/d (30,000+16,000) 46,000

URP Inventory (400) 

Dividend payable (5% x 350,000) (17,500) 

Dividend receivable : Berry (80% x 10,000) 8,000 : Cherry (30% x 6,000) 1,800

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 593,200 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 56,750  Account Receivable (20,000+19,000+7,000) 46,000 Bank (14,000+12,000+6,000) -27,000 5,000 Cash in transit (2,000+1,000) 3,000 840,750 Equity

Ordinary share @RM2.00 each 350,000

Share Premium 50,000

Retained Profit  39,920

Non Controlling Interest  117,730

Non-current Liabilities

8% Debentures (140,000+77,000) 217,000

Current Liabilities

 Account Payables (14,000+20,000+12,000) 46,000

Ordinary Dividend Payable : Parent 17,500

: Non-controlling Interest (2,000+600) 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

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.

SL million Rate RM million

Land 200 0.95 190 Machine 80 0.90 72  Accumulated depreciation (20) 0.90 (18) Inventory 30 0.80 24 Monetary assets 60 0.85 51 Monetary liabilities (80) 0.85 (68) 270 251 Ordinary shares 200 0.95 190

Retained earnings: pre 40 0.95 38

: post 30 bal. fig. 23

270 251

RM million Post acquisition reserves  23

Less: Retained profit for the year (17) 

Exchange difference 6

Question 4

Furher Berhad Group

Consolidated Statement of Cash Flow for the year ended 30 June 2012

RM’000

RM’000

Cash flows from operating activities

Net profit before tax 28,066

√

 Adjustments for:

Depreciation 13,982

√

Impairment of goodwill 1,888

√√

Investment income (222)

√

Interest expense 3112

√

Gain on disposal of equipment (2,872)

√

Operating profit before working capital changes 43,954

Increase in inventory (658)

√√

Decrease in trade receivables 12,174

√√

Decrease in trade payables (1,368)

√√

Cash generated from operations 54,102

Interest paid (3,112)

√

Tax paid (7,030)

√√

Net cash from operating activities 43,960 Cash flows from investing activities

Purchase of property, plant and equipment (49,798)

√√√√√

Proceeds from sale of equipment 9,800

√

 Acquisition of subsidiary -21,100+2,260 (18,840)

√√

Investment income 222

√

Net cash used in investing activities (58,616) Cash flows from financing activities

Proceeds from issue of share capital 6,000

√√√

Issue of 10% debenture 10,538

√

Dividend paid to non controlling interest (10,724)

√√√

Dividend paid (1,334)

√√√

Net cash in financing activities 4,480

Net decrease in cash and cash equivalents

√

(10,176) Cash and cash equivalent at the beginning of period 2,984

√√

Cash and cash equivalent at end of period (7,192)

38

√

x ½ = 19 marks Presentation: 1 mark

Workings Taxation payable

RM’000

RM’000

Tax paid √ 7,030 b/f 5,652 c/f 6,164 SoCI

√

7,542 PPE

RM’000

RM’000

b/f 163,028 Depreciation

√

13,982  Acq of sub

√

22,500 Revaluation

√

12,250 Disposal

√

6,928 Additions √49,798 c/f 226,666  ARR

RM’000

RM’000

b/f 10,502 c/f 20,302 PPE 9,800 OSC

RM’000

RM’000

b/f 45,522  Acq of subs

√

10,000 c/f 57,522 New issue √ 2,000 Share premium

RM’000

RM’000

b/f 20,036 c/f 24,036 New issue √ 4,000 Goodwill

RM’000

RM’000

b/f 600 Impairment

√

1,888  Acq of S

√

6,444 c/f 5,156

Non controlling interest

RM’000

RM’000

Div pd 10,724 b/f 9,179  Acq of S

√√

6,164 c/f 11,273 TCI

√

6,654 Retained earnings

RM’000

RM’000

Div payable 2,274 b/f 65,949 c/f 79,995 SoCI

√√

16,320