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Solution Far450 - Jun 2014

Skype Bhd Group reported total comprehensive income of RM32.34 million for the year ended 31 December 2013. This comprised profit for the year of RM32.04 million and other comprehensive income of RM300,000 from the surplus on fair value of non-depreciable assets. Profit for the year was attributable to the owners of the parent company of RM26.84 million and to non-controlling interests of RM4.22 million for Tweet Bhd and RM980,000 for Vine Bhd. The Group's statement of financial position showed total equity of RM52.03 million, including retained profits of RM37.29 million and non-controlling interests of RM14.74 million.

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804 views7 pages

Solution Far450 - Jun 2014

Skype Bhd Group reported total comprehensive income of RM32.34 million for the year ended 31 December 2013. This comprised profit for the year of RM32.04 million and other comprehensive income of RM300,000 from the surplus on fair value of non-depreciable assets. Profit for the year was attributable to the owners of the parent company of RM26.84 million and to non-controlling interests of RM4.22 million for Tweet Bhd and RM980,000 for Vine Bhd. The Group's statement of financial position showed total equity of RM52.03 million, including retained profits of RM37.29 million and non-controlling interests of RM14.74 million.

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SUGGESTED SOLUTION

FAR 450 JUNE 2014


QUESTION 1
a.

- Relationship remains the same but controlling interest increased from 70% to 90%
and hence NCI decreased from 30% to 10%.
Increase in controlling
interest is treated as a transaction between equity owners. As such gain/loss in
reduction of NCI is taken to equity through OCI.
- The additional acquisition will not alter the goodwill computed on the first
acquisition.
- Consolidate in CSOFP and NCI % based on 10%.

b.
Goodwill

NCI

GRP

Dory Bhd (70%) 1st acquisition


Consideration transferred
NCI (30% x 468)
FV of net asset 1/1/2013
OSC
RP
Other component of equity
Land
Bargain purchase
Gain/loss 2nd acquisition
Consideration transferred
20% x 300/5 x 2 x 4
FV of net asset 31/12/2013
OSC
RP
Other component of equity
Land

300
140.4
300
149
13
6

(468)
27.6
96

300
221
18
6
20% x 545

(109)
13

Gain
Cod Bhd
Consideration transferred
NCI (20% x 263)
Less; FV of net asset 1/1/2013
OSC
RP
Other component of equity
Brand
Goodwill

140.4

271
52.6
195
45
12
11

(263)
60.6

(109)

52.6

NCI

GRP

Retained profit
Tuna Bhd
Bal c/f
Acquisition cost
Bargain purchase
Dividend receivable:
Dory (15 x 90%)
Cod (7 x 80%)
Urp:GIT
Cod Bhd
Bal c/f
Pre
URP (plant)
Over dep.
Amortisation-brand
Dory Bhd
Bal c/f
Pre

533
(0.5)
27.6
13.5
5.6
(0.1)
85
(45)
(3)
0.6
(2.2)
35.4

20%

7.08

221
(149)
72

30%

21.6

Post other comp of equity


Dory: (18 13) x 30%
Cod: (22 12) x 20%
CSOFP

1.5
2
116.18

80%

70%

28.32

50.4

657.82

Consolidated Statement of Financial Position of Tuna Bhd Group as at 31 December 2013


RMmill
Assets
Property, plant and equipment 1044 + 6 3 + 0.6
1,047.6
Intangible assets- Brand
11 2.2
8.8
Goodwill
60.6
Current assets
Equity and liabilities
Ordinary shares
Retained profit
Other components of equity

1168 5 + 1.1 0.1


560 + 24
30 + 3.5 + 8 + 72 + 13

Non controlling interest


Non current liabilities
Current liabilities

1,164
2,281
584
657.82
126.5
116.18

393 + 0.5 13.5 5.6 3.9

426
370.5
2,281

QUESTION 2a

RMmillion

Profit before taxation


Gw impairment
Depreciation
Associates profit
Increase in trade receivables
Increase in inventories
Increase in trade payables
Cash generated from operations
Workings
CT (30 + 107.5)
NCI (110x25%)
FV of NA
Goodwill

Bal b/d
Acq

35
15
60
(90)
(7.5)
(10)

4
6.5

137.5
27.5
(110)
55
Goodwill
300 Impairment
55 Bal c/d

15
340

2b.
Roselle Bhd Group
Consolidated Statement of Cash Flows for year ended 31 December 2013
RMmillion
RMmillion
Cash flows from investing activities
Acquisition of associate

(50)

Acquisition of property, plant and equipment


Acquisition of subsidiary (30 10)
Dividend received from associate

Net cash used in investing activities

(115)
(20)
65
(120)

Cash flows from financing activities


Dividend paid to NCI
Proceeds of share issue
Repayment of borrowing (1310 1028)

(13)
252.5
(282)

Net cash used in financing activities

(42.5)

Workings
Bal b/d

PPE
1110 Dep

60

Acq:Balsam

60 Bal c/d

Revaluation
Cash

50
115

Cash
Bal c/d

NCI
Bal b/d
13 Acq:Balsam
487
TCI

Bal c/d
900+210

OSC & SP
1110 Bal b/d

1275

455
27.5
17.5

Bal b/d
New asso.
Share of pf.

750

Acq:Balsam

107.5

Cash

/252.5

Inv in asso.
285 Cash
50
90 Bal c/d

65
360

QUESTION 3a
Skype Bhd Group
Consolidated Statement of Profit or Loss for the year ended 31 December 2013
Revenue
Cost of sales
Gross profit
Expenses

(59,000 +42,500)+ (36,000 x 4/12)- 3,000


(23,000 + 19,500) + (21,000 x 4/12) -3,000
+120 350
(12,500 +9,000) + (6,600 x 4/12) (100 over
dep.)

Impairment goodwill
Bargain purchase
Income from other investment
Share of profit. in associate
Profit before tax
Taxation
Profit for the year

1,200 + (1,500 x 4/12)


(5,800 500 dep) x 30%
(8,400 + 4,750) + (3,900 x 4/12)

Other comprehensive income


Surplus on fair value of non depreciable asset
Total comprehensive income for the year
Profit for the year attributable to :
Owners of parent
NCI - Tweet
Vine

RM000
110,500
(46,270)
_________
64,230
(23,600)
(120)
2,690
1,700
1,590
46,490
(14,450)
32,040
300
32,340
26,836
W1 4,224
W2
980
32,040

Total comprehensive income attributable to :


Owners of parent
NCI (4224 + (300x40%) / + 980

27,016
5,324
32,340
4

Workings
NCI : Tweet Bhd (W1)
Profit for the year
Ord div from Vine Bhd
URP - closing stock
opening stock

(2,000 x 6%)

Impairment

10,960
(510)
(120)
350
10,680 x 40%

120 x 40%

Vine Bhd (W2)


Profit for the year (6,000 x 4/12 x 49%)

4,272
(48)
4,224

980

3b.
Skype Bhd Group
Statement of Changes in Equity for the year ended 31 December 2013
Retained Profit
NCI
RM000
RM000
Balance b/f
W1
11,707
W2
3,964
Acquisition of subsidiary
5,760
TCI
5,324
Profit for the year
26,836
Ordinary dividend
(1,250)
W3
(310)
Balance c/f
37,293
14,738
16/2 = 8 marks

(W1) Retained profit b/f


Skype Bhd
Retained profit b/f
URP machinery
Depreciation

9,980
(500)
100

(2m -1.5m)
(0.5m / 5 yrs)

Tweet Bhd
Retained profit b/f
Less :pre-acquisition profit
Less : URP opening stock
Apps Bhd(Associate)
Retained profit b/f
Less : pre-acquisition profit
Less depreciation

5,260
(2,500)
(350)
2,410 x 60%
4,870
(2,100)
(500)
2,270 x 30%

9,580

1,446

681
11,707

(W2) NCI b/f


Tweet Bhd
FV at d.o.a (1/1/2010)

7,000

Retained profit (from 1/1/2010 till 1/1/2013)


Consideration transferred - Vine
(W3) Ordinary dividend
Tweet
Vine

2,410 x 40%
10,000 x 40%

964
(4,000)
3,964

550 x 40% = 220


600 x 15% = 90
310

QUESTION 4A
a.
Offer 1
Offer 2

Before disposal
8/10 = 80%
80%

Disposal
7/8 x 80% = 70%
4/8 x 80% = 40%

After disposal
10% (simple investment)
40% (associate)

Snowy should accept offer 2 in order to exert significant influence


b. The group SOPL will consolidate the results of the operation of Winter Bhd up to date
when control is lost ie 1 July 2013. Subsequent to that date it will be equity accounted for
and disclosed as share of associate profit.
In the group statement of financial position, the investment will be accounted for using the
equity method. The shares retained will be remeasured at fair value on the date when
control is lost.
c.
Offer 2
RM million

RM million
15.6

Sales Proceed
Fair value of remaining shares on d.o.d

4 x 3.9

Net assets at disposal date:


Ordinary shares
Retained profits b/f
Current year profit

15.6
31.2
10

15
20 x 6/12 =10
35 x 80%

Gain on disposal

(28)
3.2

QUESTION 4B
The 3 elements of control under MFRS 10 are:
- Power over the investee
- Exposure, or rights, to variable returns from its involvement with the investee
- The ability to use its power to affect the returns.
Although Radon owns 60% of the voting rights, it may not give power to Radon due to the
terms of contractual agreement.
The shareholder agreement shows that Neon and Radon are each responsible to direct the
relevant activities of Xena Bhd. In this case, each investor needs to determine whether it is
directing the activities that most significantly affect the investees returns. Accordingly each
investor needs to evaluate whether developing the product or the manufacturing &
marketing of the product is the activity that has the greatest effect on the investees returns.
In making such evaluation, the investors should consider the purpose and design of the
entity Xena Bhd.

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