FAR410 CHAPTER 4 NON CURRENT LIABILITIES 2014.pptx

FAR410 CHAPTER 4 NON CURRENT LIABILITIES 2014.pptx -...

This preview shows page 1 - 9 out of 37 pages.

CHAPTER 4 NON-CURRENT LIABILITIES
Image of page 1

Subscribe to view the full document.

TOPIC OUTCOMES At the end of this topic, students should be able to: Understand on share buy back. Understand the issuance and redemption of preference shares. Aware on the distributable and non-distributable reserve.
Image of page 2
Non-current liabilities Include: Convertible or Redeemable Preference Shares with fixed rate of dividend – dividend Corporate Bonds – interest Long Term Loans – interest Leases
Image of page 3

Subscribe to view the full document.

Convertible or Redeemable Preference Shares with fixed rate of dividend shall be presented as liability separately from shareholders’ equity. Non-redeemable preference shares with fixed rate of dividend are financial liabilities. Preference shares that are redeemable at the option of the issuer but has fixed rate of dividends are compound instruments . (Refer Eg. 27 pg. 1134) Preference shares that are contractually redeemable at a specific date are financial liabilities . Any dividends attributable shall be presented as an expense in the Statement of Profit or Loss. MFRS 132:
Image of page 4
Redemption of redeemable preference shares (Companies Act 1965) The following statutory provisions must be achieved: Fully paid-up shares Redeemed using one the following methods: Out of proceeds of a fresh issue of shares made for the purpose of redemption. Out of profits (retained profit). Combination of both. If the redemption is made out of profits, a capital redemption reserve must be created of a sum equal to the nominal amount of the shares redeemed. Dr. Retained Profits Cr. Capital Redemption Reserve The capital redemption reserve can only be used for the purpose of issuing bonus shares to members. Any premium payable on redemption shall be made out of retained profits or share premium account.
Image of page 5

Subscribe to view the full document.

Example - Redemption of redeemable preference shares (Companies Act 1965) – Fresh issue of shares Below is the extract Statement of Financial Position of Prime Bhd as at 1 January 2007: RM Issued and paid up capital 20,000,000 ordinary shares of RM1 each 20,000,000 10,000,000 redeemable preference shares of RM1 each 10,000,000 Reserves Share premium 1,000,000 Retained profits 12,000,000 43,000,000 The preference shares were issued on 1 January 2003 at par value of RM1 and will be redeemed on 31 December 2007 at a premium of RM0.20 per share. A fresh issue of 10,000,000 ordinary shares was made for the purpose of the redemption at RM1.10. The new shares were fully subscribed and paid for by the end of the year. Required: 1. Prepare journal entries to record the above transactions. 2. Extract statement of financial position after redemption
Image of page 6
Example - Redemption of redeemable preference shares (Companies Act 1965) - Fresh issue of shares Journal Entries – Issue of Ordinary Shares Dr. Cash 11,000,000 Cr. Ordinary Shares 10,000,000 Cr. Share Premium 1,000,000 Journal Entries – Redemption of Redeemable Preference Shares 1. Dr. Redeemable Preference Shares 10,000,000 Cr. Cash 10,000,000 2. Dr. Share Premium 2,000,000 Cr. Cash 2,000,000
Image of page 7

Subscribe to view the full document.

Example - Redemption of redeemable preference shares (Companies Act 1965) - Fresh issue of shares
Image of page 8
Image of page 9

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern