QUESTION 2 Usahamaju Bhd is a public company supplying electrical hardware and services especially in installing broad kind of electrical appliances...
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QUESTION 2Consolidated Financial StatementsJoint ArrangementsInvestments in Associates and Joint Ventures 

Usahamaju Bhd is a public company supplying electrical hardware and services especially in installing broad kind of electrical appliances and equipment. The company had successfully obtained a government project for installing electrical equipment in hospitals in Selangor. The group accountant, Encik Ahmad is discussing with the directors of Usahamaju Bhd related to the application of MFRS10 , MFRS11 and MFRS128 in preparing the group financial statements.

A contractual agreement between Usahamaju Bhd, Exact Bhd and Berkat Bhd empowers them to jointly control TG Bhd. The three companies invested in TG Bhd in order to complete the project as scheduled. Decisions related to the relevant business activities of TG Bhd should have unanimous consent of all the companies sharing the control. Since Usahamaju Bhd is the highest investor of 40% in TG Bhd, Encik Ahmad was contented with an idea that the investment in TG Bhd should apply the acquisition method and the financial statements of TG Bhd should be consolidated with Usahamaju Bhd in accordance with MFRS10 Consolidated Financial Statements.

 

Required:

 

State your opinion on Encik Ahmad's view related to above issue. Discuss your opinion with reference to the relevant MFRSs. (MFRS10 Consolidated Financial Statements, MFRS11 Joint Arrangements and MFRS128 Investments in Associates and Joint Ventures)


 

QUESTION 3

Highland Bhd (a public limited company) financial year end every 30 June, is in the process of downsizing its business operations. The Chief Executive Officer (CEO) of Highland Bhd plans to streamline its operations and suggests disposal of 90% of its holding in Tuah Bhd on 1 July 2018 for RM160 million. Highland Bhd holds 32 million units out of 40 million units of issued ordinary shares of RM1 each in Tuah Bhd which were acquired in 2014 at a cost of RM100 million. The balances of Tuah Bhd's retained profit and general reserve on the date of acquisition were RM42 million and RM12 million respectively. The carrying values of Tuah's net assets reflect their fair values except for a piece of land which has a fair value of RM20 million above the carrying value at the acquisition date. Goodwill on acquisition was remain unimpaired.

 

The balance in the retained profit of Tuah Bhd on 1 July 2018 was RM80 million and its forecast profit for year ending 30 June 2019 is RM20 million. The market price of Tuah Bhd's ordinary shares on the date of disposal was RM2.00 per share. Balances on other accounts are expected to remain unchanged. Profits are deemed to accrue evenly throughout the year.

Required:

a)   Calculate the gain or loss on the disposal of the share for the Highland Bhd.

(10 marks)

 

b)   Discuss the effects of the implementation of the plan to the group's financial statements as at 30 June 2019.


QUESTION 4

On 1 January 2019, Kencana Bhd acquired 10 million ordinary shares in Seroja Bhd. The issued share capital of Seroja Bhd comprised of 25 million ordinary shares of RM1 each. The remaining ordinary shares are held equally by two investors respectively. The shareholders' agreement grants Kencana Bhd the right to appoint, remove and set the remuneration of management responsible for directing the relevant activities. 


Required:

Discuss whether Kencana Bhd has a control over Seroja Bhd on 1 January 2019.

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