Advanced Financial Accounting and Reporting (AFAR)

Transcription

1 SET A SEPTEMBER 2015 SUGGESTED SOLUTION QUESTION 1 a) Labian Bhd Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June Revenue (176, ,840) 50, ,240 Cost of sales (136, ,200) 50, ,000 (185,000) Gross profit 47,240 Operating expenses (21, ,860) (26,375) Finance cost ( ) (432) Share of Associate s profit (2,955 x 30%) Profit before tax 21,319.5 Taxation (4, ,150) (7,677) Profit after tax 13,642.5 Other comprehensive income Decrease in NCI (W1) (590) Total comprehensive income 13,052.5 Profit attributable to: Equity holders of Labian Bhd 11,752.5 NCI 9,450 x 20% 1,890 13,642.5 TCI attributable to: Equity holders of Labian Bhd 11,162.5 NCI 1,890 13,052.5 Workings W1 Decrease in NCI (1 July 2014). Transaction between owners Consideration transferred 2,400 Less: Fair values of net assets acquired Ordinary shares 4,000 General reserves 400 Retained profits ( ) 2,450 Asset revaluation reserve 2,200 9,050 20% 1,810 Loss on acquisition (decrease in NCI) 590 (20 x ½ = 10 marks) 2

2 b) Labian Bhd Consolidated Statement of Financial Position as at 30 June 2015 Non-current assets 000 Goodwill (W5) 1,340 Property, plant and equipment (40, ,000) + 2, ,175 Investment in Campin Bhd 1, ,536.5 Loan to Campin Bhd 2,000 Current assets Inventory (12, ,300) 10,000 9,050 Bills receivable Accounts receivable (14, ,450) ,340 Bank (4,000 +1,000) 5, ,461.5 Equity Ordinary shares of 1 each 21,000 General reserve 2,000 Retained profit 20, , , ,432.5 NCI 3, ,890 1, ,640 Non-current liabilities 7% Bank loan 4,000 10% Debenture 2,000 Current liabilities Bills payable Accounts payable (24, ,850) ,909 Ordinary dividends payable ,461.5 W5 Goodwill on consolidation (1 July 2012) - Bintu Consideration transferred 6,200 NCI (8,100 x 40%) 3,240 9,440 Fair value of net assets acquired Ordinary shares 4,000 Retained profits 1,500 General reserves 400 Asset revaluation reserve 2,200 8,100 Goodwill 1,340 (30 x ½ = 15 marks) [Total: 25 marks] 3

3 QUESTION 2 Advanced Financial Accounting and Reporting (AFAR) A. The convertible loan stocks are compound financial instruments. According to MFRS 132, compound financial instruments are to be separated into their liability components and equity components and will be presented under the respective sections in the statement of financial position. Therefore, the convertible loan stocks will be presented as follows: Alami Bhd Statement of Financial Position (extract) as at 30 June 2015 Non-current liability 000 6% Convertible loan stocks Equity Convertible loan stock reserve 1, Workings: Period ending Discount factor 10% Interest payment 6% Principal repayment Total Present value 30 June ,000 10,600 7, Liability component 8, Proceeds 10, Equity component 1, (16 x ½ = 8 marks) B. In year ended 30 June 2015, the company should recognise the bonds as held-tomaturity financial assets as the bonds are intended to be held to its maturity date and the company planned to collect the cash flows arising from the bonds. Initially, it should be recognised at 85.6 million and subsequently it should be recognised at amortised cost using the effective interest rate of 8.67%. The changes in values between opening balance and closing balance are to be recognised in profit or loss. End of year Opening balance Effective interest rate 8.67% Interest receivables Closing Balance 30 June , , , , (10 x ½ = 5 marks) C. A joint operation is a joint arrangement whereby parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities relating to the arrangement. The contractual arrangement establishes the revenue and expenses of the arrangement on the basis of the performance of each party. Those parties are called joint operators. 4

4 A joint venture is a joint arrangement whereby parties that have joint control of the arrangement have rights to the net assets of the arrangement. The contractual arrangement establishes each party s share of the profit or loss relating to the activities of the arrangement. Those parties are called joint venturers. (12 x ½ = 6 marks) D. For the year ended 30 June 2015, the company has a taxable temporary difference from the PPE of 2,400,000 (20,400,000 18,000,000) and a deductible temporary difference from the provision of warranty of 4,000,000 (16,000,000 12,000,000), resulting in a net deductible temporary difference of 1,600,000 (4,000,000 2,400,000). This will give rise to a deferred tax asset of 400,000 (1,600,000 x 25%). Since it is not probable for the company to have sufficient profits to utilise all of the deductible temporary difference (4,000,000), under MFRS 112, the amount that can be recognised is restricted to the amount of taxable temporary difference of 2,400,000. The net effect is no deferred tax carried forward as at 30 June 2015 and a deferred tax income of 500,000 will be recognised in profit or loss. (12 x ½ = 6 marks) QUESTION 3 Aqil Containers Bhd Statement of changes in equity for the year ended 30 June 2015 Share Share ARR Retained Total capital premium profit Balance as at 1 July ,000 14,280 13,720 45, ,070 Prior year adjustment: Depreciation of building // (24,000,000 x 20%/40yrs) Balance restated 110,000 14,280 13,720 45, ,190 Interim dividend paid /(12,500) (12,500) Profit for the year /1,710 1,696 Issue of new shares /10,000 //30,000 40,000 Deficit on revaluation of land /(1,800) (1,800) Balance as at 30 June ,000 44,280 11,920 34, ,586 8/ x ½ = 4 marks 5

5 Aqil Containers Bhd Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June Revenue 120,000 / Cost of sales (48,320) / Gross profit 71,680 Other income: Investment income 920 / 72,600 Administration and distribution costs (37, ,200) (54,930) // Impairment loss on NCA held for sale (29,700 24,600) (5,100) / Retirement benefit expenses (480) /// Profit from operation 12,090 Finance cost (830) / Profit before tax 11,260 Taxation (9,500) / Profit for the year 1,760 Other Comprehensive Income Actuarial loss (50) /////// TOTAL COMPREHENSIVE INCOME 1,710 18/ x ½ = 9 marks Aqil Containers Bhd Statement of Financial Position as at 30 June Non-current assets Property, plant and equipment 138,810 Investments / 10, ,310 Current assets Inventory 57,200 / Trade receivables 72,014 / Cash and bank balances (4, ) 3,470 / 132,684 Non-current assets held for sale / 24, ,594 Financed by: Share capital 120,000 Retained earnings 34,400 Other reserves / 56, ,600 Non-current liabilities 5% debentures 15,000 / 4% long-term loan 2,000 / Deferred tax liabilities 1,760 / Retirement benefit liability 100 // 18,860 6

6 Current liabilities Tax payable 434 /// Trade payables 76,700 / 77, ,594 24/ x ½ = 12 marks Notes to the financial statements 1. Property, plant and equipment Land Building P&M Total Cost/valuation: Balance as at 1 July ,600 71, , ,400 Prior year adjustment: Error /4,800 /(4,800) Balance restated 37,400 67, , ,400 Addition ,000/ 24,000 Classified as held for sale - /(33,000) (33,000) Deficit on revaluation /(1,800) - - (1,800) Balance as at 30 June ,600 34, , ,600 Accumulated depreciation: Balance as at 1 July ,160 65,000 79,160 Prior year adjustment: Error - /(120) (120) Balance restated - 14,040 65,000 79,040 Charge for the year - /850 16,200/ 17,050 Classified as held for sale - /(3,300) (3,300) Balance as at 30 June ,590 81,200 92,790 Net carrying amount as at 30 June ,600 22,410 80, ,810 Workings: 1. Retirement Benefits PV of Retirement liability Bal b/f 2,900,000 Current service cost 450,000 Interest cost (10% x 2,900,000) 290,000 (-) Benefit paid (240,000) 3,400,000 Bal c/f 3,500,000 Actuarial loss (100,000) 7

7 FV Plan Asset Bal b/f 2,600,000 Contribution paid 730,000 Expected return (10% x 2,600,000) 260,000 (-) Benefit paid (240,000) 3,350,000 Bal c/f 3,400,000 Actuarial gain 50,000 Retirement benefit expenses Current service cost 450,000 Interest cost 290,000 (-) expected return (260,000) 480,000 Disclosure in SOFP PV of retirement liability 3,500,000 FV of Plan Asset 3,400,000 Retirement liability 100,000 Tax Payables a/c Balance b/f 546 SPL 9,500 Tax paid 8,000 Deferred tax (1,760 1,240) 520 Balance c/f 434 9,500 9,500 SOLUTION TO QUESTION 4 A. a) The patent has to be capitalised as an asset and shown in the statement of financial position as intangible asset of 300,000. The patent will also be amortised over a period of 10 years and the amortisation expenses of 30,000 per year will be charged to the statement of profit or loss. b) Under MFRS 138, internally generated goodwill and brand cannot be capitalised as asset. The cost incurred in generating internal goodwill and brand should be written off as expenses in the statement of profit or loss. 8

8 c). This is a development cost. Since the management is very certain that it will bring future economic benefits and the fact that the company has received few orders from its regular customers as well as plans to launch the new product early next year, it indicates that the company has tested the viability and marketability of the products, therefore under MFRS 138 the development cost of 800,000 should be capitalised as intangible asset and will be amortised over its useful life. B. a) The lease should be classified as a financial lease as it meets the requirement of MFRS 117 with requires the risks and rewards of ownership to be transferred to the lessee. b) A non-current asset is recorded at the fair value 22,840 (subject to depreciation). Depreciation is over the ten years useful life. (Note that this is shorter than the lease term which is taken to include both the initial four years and the indefinite secondary period). Annual depreciation charge = 1/10 x 22,840 = 2,284 Working: The total financial charge is 32,000 22,840 = 9,160. Allocation of this to each rental payment and the consequent capital sum outstanding is calculated as follows: 2 marks Period (year ended 30 June) Liability at start of period Finance charge at 15% p.a. Subtotal Rental paid Liability at end of period ,840 3,426 26,266 (8,000) 18, ,266 2,740 21,006 (8,000) 13, ,006 1,951 14,957 (8,000) 6, ,957 1,043 8,000 (8,000) - 9,160 32,000 Extract of Statement of Profit or Loss for y/e 30 June 2015 Finance change 3,426 SOFP (extract) as at 30 June 2015 Non-Current liability Fin lease payable 13,006 Current Liability Fin lease payable (18,266 13,006) 5, x 1/3 = 5 marks (sub-total: 7 marks) 9

9 C. a) The five criteria are: 1. Significant risks and rewards of ownership of the goods have been transferred to the buyer. 2. The seller neither continues managerial involvement associated with ownership nor retains effective control over the goods sold. 3. The amount of revenue can be measured reliably. 4. It is probable that economic benefits associated with the transaction will flow to the entity. 5. The cost incurred or to be incurred in respect of the transaction can be measured reliably. (any 3 of the above) b) MFRS 118 Revenue requires revenue to be measured at the fair value of the consideration received or receivable, taking into account the amount of any trade discounts and volume rebates allowed by the entity //. Rempahratus Sdn Bhd should, therefore, recognize revenue net of volume rebates (gross sales value less volume rebates). The 5% sales discount should not be netted against revenue. Instead, it should be reflected as an expense in the income statements ///. (5 marks) [Total: 25 marks] 10