AC/JULY 2023/FAR610/620
FAR610/620
FINAL EXAM | SUGGESTED SOLUTION
QUESTION 1
PART A
a. Computation of goodwill or bargain purchase – Lulu Bhd
(RM’000) (RM’000)
CT (2,000x60%x3) 3,600√
NCI (5,500x40%√) 2,200 5,800
Net asset of d.o.a
Ordinary shares 2,000+200 2,200√√
Retained profit 900√
Other reserve 400-200 200√√
OCE 1,000√
ARR 1,200√ (5,500)
Goodwill 300
Impairment (5%) √ (15)
To CSOFP 285
(10√ x 1/2 = 5 marks)
b. Computation of goodwill or bargain purchase – Kaka Bhd
(RM’000) (RM’000)
CT (3,000x70%)x1.20) 2,520√√
NCI (4,760x30%√) 1,428
3,948
Net asset of d.o.a
Ordinary shares 3,000√
Retained profit 100+(1,000x6/12) 600√√
Brand 1,160√ (4,760)
Bargain Purchase√ (812)
(8√ x 1/2 = 4 marks)
c. Calculation of gain/(loss) on second acquisition – Lulu Bhd
RM’000 RM’000
CT 1,400√
Net asset of d.o.a
Ordinary shares 2,200√
Retained profit (1,500 + (5,000 x 3/12) 2,750√√
Other reserve 200√
OCE 1,000√
ARR 1,200√
7,350 x 20%√ (1,470)
Gain – equity (70)
(8√ x ½ = 4 marks)
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AC/JULY 2023/FAR610/620
d. Consolidated Statement of Profit or Loss and Other Comprehensive Income for
the Year Ended 31 December 2022
RM’000
Revenue (98,000+58,800)+(23,700x61/2)-13,000 155,650 √√ √
Cost of sales (76,000+49,000)+(20,000x61/2)-13,000+200 (122,200) √√ √√
Gross profit 33,450
Gain on disposal 500-500 -
PSD 40-40 -
Interest income 350-100 250√√
Impairment loss recoverable (80–55) 25√
Bargain purchase 812√
Share of profit Associate (1,000-300)x25% 175√√
Operating expenses (11,800+2,700)+(1,400x6/12)+300 deprn plant & (15,577.5)
equip-100 depr equip+27.5 deprn machine+150 deprn IP √√ √√ √√
Impairment on goodwill (15)√
Finance cost (140+100)-100 (140)√√
Profit before tax 18,979.5
Taxation (4,200+2,000)+(1,300x6/12) (6,850) √√
Profit after taxation (PAT) 12,129.5
Add: Other comprehensive income
Revaluation – Brand (Lulu Bhd) (100) √
Revaluation – IP (Lili Bhd) 3,000√
Changes in shareholding 70√
Total Other Comprehensive Income (TOCI) 15,099.5
PAT attributable to: √
Equity holders of the parent 10,834.5
NCI (W1) (1,175 + 120) 1,295
12,129.5
TOCI attributable to: √
Equity holders of the parent 13,824.5
NCI = 1,295 - (100 x 20%) 1,275
15,099.5
W1: NCI
Lulu Bhd Kaka Bhd Kaka Bhd
RM’000 RM’000 Total
PAT 5,000√ (1,000 X 6/12) 500√
Deprn (300) √ -
URP (200) √
PSD - (100) √ x60%√= 60
4,700 200
4,700x3/12√x40%√ = 470 200 x30%√ 60
4,700 x9/12√x20%√= 705
1,175 120
(40√ x 1/2 = 20 marks)
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AC/JULY 2023/FAR610/620
e. Consolidated Statement of Changes in Equity Lili Bhd Group for the Year Ended 31
December 2022
GRP (RM’000) NCI (RM’000)
Balance b/f (W1) 8,552.50 2,360
Changes in shareholding (1,470)√
Profit for the year√ 10,834.5 1,295
Acquisition during the year √ W2 2,028
Revaluation during the year √ (20)√
OS dividend (200)√ W3 (85) (40+45)
PS dividend (100 X 60%) - (60)
Balance c/f 19,187 4,048
W1 Working GRP GOR GOCE NCI
1/1/2022
RP – Lili 10,050√
Depn (27.5) √
Depn (1,650) √ 8,372.5
RP – Lulu 1,500√
Pre RP (900) √
Depn (300) √
300 x 60% 180 120
GR – Lili 1,000
GR – Lulu 500
Pre GR (400) √
100 x 60% 60 40
OCE – Lili 3,000
Changes in shareholding 70
OCE – Lulu 1,000
Pre OCE (1,000) - -
Lulu Bhd
NCI @ DOA 2,200 √
Total 8,552.5 1,060 3,070 2,360
W2 Acquisition during the year (Kaka Bhd)
NCI @ DOA 1,428 √
PSC (1,000x60%) 600 √
Total 2,028
W3 Calculation of OS dividend
Lulu Bhd: 200 x 20% = 40 √
Kaka Bhd: 150 x 30% = 45 √
Total = 85
(18√ x 1/2 = 9 marks)
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AC/JULY 2023/FAR610/620
f. Consolidated Statement of Financial Position Lili Bhd Group as at 31
December 2022
RM’000’
Non-Current Assets
Property, plant and equipment 29,570
(15,400+9,500+4,500)+1,200-500-600+100-55+25 √√ √√ √√ √
Investment property 5,000+(3,000-1,800) 6,200√√
Intangible assets √ (1,160-100) 1,060
Investment in Associate √ (2,000+175) 2,175
Goodwill√ 285
Current Assets
Inventory (8,000+3,500+500)-200 11,800√√
Bills receivable 50√
Trade receivables (8,275+2,225+1,000)-1,300 8,200√√
Bank (4,000+500+600)-400-1,400-2,000 1,300 √√ √√
Cash in transit 200√
60,840
Equity
OSC 10,000+2,520 12,520√√
Group OCE 3,070√
Group Other reserve 1,060√
Group Retained profit 19,187
NCI 4,048
Asset Revaluation Reserve 3,000 - 80 2,920√
Non-current Liabilities
7% Bank loan 2,000√
3% Redeemable PS 1,500√
Current Liabilities
Trade payables (11,565+3,200+700)-1,300 14,165√√
Bills payable 25√
Ordinary dividend payable by Lili Bhd 200√
Ordinary dividend payable to NCI: Lulu Bhd (200-160) 40√
Kaka Bhd (150-105) 45√
Preference dividend payable to NCI: Kaka Bhd (100-40) 60√
60,840
(36√ x 1/2 = 18 marks)
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AC/JULY 2023/FAR610/620
QUESTION 1
PART B
a)i) The differences between Joint operation and joint venture.
Joint operation Joint venture
1. The operation may be structured A joint venture involves the
either through a separate entity. establishment of a separate entity.
2. The parties to the arrangement The parties have no interest in the
(joint operators) have rights to the asset arrangements. The separate
assets of the arrangement. entity that has the rights to the
assets of the arrangement.
3. The parties to the arrangement are 3rd party does not have rights of
liable for claims raised by 3rd party. resources against any parties for an
obligation of the arrangement.
4. The contractual arrangement The contractual arrangement
establishes the allocation of establishes the allocation of revenue
revenue and expenses based on and expenses based on each
each party’s performance. party’s share in the profit or loss.
(Any 2 points from each category x ½ = 2 marks)
Any other points are acceptable.
a)ii) Accounting treatment for a joint venture.
In a joint venture, the venturers have to apply the equity method in accordance with
MFRS 128. √
Under the equity method, the investment in a joint venture is initially recognised at
cost and is not consolidated√. The carrying amount of the investment will be
disclosed as a separate item under non-current assets at the reporting date.
The carrying amount is increased or decreased √ by the investor’s share of the
post-acquisition profits or loss of the investee.
(3 √ x 1 = 3 marks)
b)i) Aloha Bhd holds 40% of the voting rights of Barrack Bhd. Thirty other investors hold
the remaining ordinary shares (60%). Aloha Bhd's absolute size and the other
shareholdings' relative size alone are not conclusive in determining whether Aloha
Bhd has rights sufficient to give it power. √
However, additional evidence of the contractual agreement that grants √ Aloha
Bhd the right to appoint, remove and set the remuneration of management responsible
for directing the relevant activities is sufficient to conclude that Aloha Bhd has power
over Barrack Bhd.√
(3 √ x 1 = 3 marks)
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AC/JULY 2023/FAR610/620
ii) Aloha Bhd does not have power over Barrack Bhd. √
Aloha Bhd has not exercised its right to direct the relevant activities yet. No additional
evidence that Aloha Bhd has the right to give its current ability to direct relevant
activities√.
(2 √ x 1 = 2 marks)
c) The substantial influence is lost, such as when a joint control or substantial influence
in the investee is disposed of. Gaga Bhd is no longer regarded as having significant
influence since it lost its seat on the board on August 2021√. Therefore, for financial
year ending 30 June 2022, investment in Lola Bhd will be accounted using the equity
method until 30 September 2021√. Gaga Bhd will account for the fair value of the
investment √ in Lola Bhd on the date it ceases to be an associate or joint venture
under MFRS139√. The difference between fair value and the carrying amount will be
recognised as part of the gain on the disposal √ of the unused portion.
(5 √ x 1 = 5 marks)
(Total: 15 marks)
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AC/JULY 2023/FAR610/620
QUESTION 2
a) Consolidated Statement of Cash flows (INDIRECT)
Cash Flows from Operating Activities RM’000
Net profit before tax 24,000 √
Adjustments for:
Share of profit of Associates (2,400 – 300) (2,100) √√
Gain on disposal of Subsidiary (2,400) √
Impairment of goodwill 600 √
Depreciation of PPE 3,600 √
Gain on disposal of PPE (5,400 – 4,500) (900) √
Interest 900 √
Operating profit before working capital changes 23,700
Increase in inventories (W1) (3,300) √√
Increase in trade receivables (W2) (2,040) √√
Increase in trade payables (W3) 140 √√
Cash generated from operation 18,500
Interest paid (900) √
Tax paid (W4) (6,600) √√√
Net Cash Inflows from Operating Activities 11,000
Cash Flows from Investing Activities
Disposal of PPE 5,400 √
Acquisition of PPE (W5) (15,000) √√√√
Disposal of subsidiary (10,200 – 1,500) 8,700 √√
Acquisition of associate (6,000) √
Dividends from associates (W6) 600 √√√√√
Acquisition of short-term investment (10,500 – 3,000) (7,500) √
Net Cash Outflows from Investing Activities (13,800)
Cash Flows from Financing Activities
Issue of shares (48,000 -33,000) 15,000 √
Dividends paid to NCI (W7) (300) √√√
Dividends paid by the parent (W8) (3,200) √√
Net Cash Inflows from Financing Activities 11,500
Net increase in cash and cash equivalents 8,700
Cash and cash equivalents b/d √ (3,900)
Cash and cash equivalents c/d √ 4,800
(40 √ x ½ = 20 marks)
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AC/JULY 2023/FAR610/620
Workings (a)
W1 Inventory A/c
Bal b/d 7,500/ Disposal of S 1,500/
Cash 3,300 Bal c/d 9,300
10,800 10,800
W2 Trade receivables A/c
Bal b/d 5,400/ Disposal of S 840/
Cash 2,040 Bal c/d 6,600
7,440 7,440
W3 Trade payables A/c
Disposal of S 540/ Bal b/d 2,000/
Bal c/d 1,600 Cash 140
2,140 2,140
W4 Tax Payable A/c
Disposal of S 1,500 / Bal b/d 2,400/
Cash 6,600 P&L 6,000 /
Bal c/d 300
8,400 8,400
W5 Property, plant and equipment A/c
Bal b/d 33,000/ Disposal of S 7,800 /
Depreciation 3,600 /
Cash 15,000 Disposal of equip 4,500 /
Bal c/d 32,100
48,000 48,000
W6 Investment in Associates A/c
Bal b/d 7,200/ Impairment 300/
P&L (share profit) 2,400/ P&L (Tax) 900/
Cash 600
Acq of A 6,000/ Bal c/d 13,800
15,600 15,600
W7 Non-controlling Interest A/c
Disposal of S (9,000 x 0.2) 1,800 / Bal b/d 6,000/
Cash 300 P&L 3,000 /
Bal c/d 6,900
9,000 9,000
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AC/JULY 2023/FAR610/620
W8 Dividend Payable A/c
Cash 3,200 Bal b/d 2,800 /
Bal c/d 2,000 RP 2,400 /
5,200 5,200
b) Operating Activities (DIRECT) for year ended 31 December 2022
RM’000 RM’000
Cash Flows from Operating Activities
Cash receipts from customers (W1) 57,060 √√
Cash paid to suppliers and employees (33,160 + 5,400) (W2) (38,560) √√ √√ √√ √√
Cash generated from operation 18,500
Interest paid (900)
Tax paid (6,600)
Net Cash Inflows from Operating Activities 11,000
(10 x ½ = 5 marks)
Working (b)
(W1) Trade Receivable A/c
Bal b/d 5,400 Disposal 840 /
Sales 59,100 / Cash Receipts 57,060
Bal c/d 6,600
64,500 64,500
(W2) Inventory A/c
Bal b/d 7,500 COS 30,000/
Purchases 33,300/ Disposal 1,500/
Bal c/d 9,300
40,800 40,800
(W2) Trade Payables A/c
Disposal 540 / Bal b/d 2,000
Cash Paid 33,160 Purchases 33,300
Bal c/d 1,600
35,3/00 35,300
(W2) Expenses A/c
Dep 3,600 / P&L 9,000
Goodwill 600 / Gain on disposal 900 /
Impairment 300 /
Cash paid 5,400
9,900 9,900
END OF SUGGESTED SOLUTION
