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QUESTION 1 Investment in Dimples 70% 70% RM000 200,000 170,000 10,000 5,000 10,000 NCI 30% RM000 76,500

Consideration transferred FV NCI 51,000 x 1.50 FV NA share capital Retained profits Other reserve FV adjustment Goodwill Alternatively: Consideration transferred FV NCI 51,000 x 1.50 FV NA Goodwill Investment in Chuckles 80% Consideration transferred FV of previously held equity 200/0,55 x 25% FV of NCI 200/0.55 x 20% FV of NA share capital Retained profits Other reserves FV adjustment Goodwill Alternatively: Consideration transferred FV of previously held equity FV of NCI FV Goodwill Gain or loss on de-recognition

195,000

(136,500) 63,500

(58,500) 18,000 RM000 200,000 76,500 276,500 (195,000) 81,500

80% 200,000 90,909

NCI 20%

72,727 250,000 17,000 35,000 18,000

320,000

(256,000) 34,909

(64,000) 8,727 RM000 200,000 90,909 72,727 363,636 (320,000) 43,636

FV at date of control CV at date of control : Cost Share of post acquisition profit 17,000 12,000 x 25% Share of post acquisition reserves 35,000 8,000 x 25% Loss to CSCI

90,909 = = = 90,000 1,250 6,750

(98,000) (7,091)
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Consolidated profits Bubbles RM000 90,000 Chuckles RM000 75,000 (17,000) Dimples RM000 65,000 (10,000) (8,000) (1,800) 45,200

Per question Pre acquisition profits Under deprn 2 x 4 years URP ITA Gain on re- measurement (8,000 7,091) From Chuckles 56,000 x 80% From Dimples 45,200 x 70% To CSFP Retained profit b/fwd PFTY

( 1,200) (1,875) 909 44,800 31,640 164,274

(2,000) 56,000

RM000 50,000 104,574

Retained profit c/fwd Consolidated other reserves Per question Pre acquisition reserves From Chuckles 20,000 x 70% To CSFP Non controlling interests FV of shares 20% x 200/0.55 FV of shares 30% x 170,000 x 1.50 Post acquisition profits Post acquisition reserves TO CSFP Bubbles RM000 40,000 14,000 54,000

164,274 Chuckles RM000 35,000 (35,000) Dimples RM000 25,000 ( 5,000) 20,000

Chuckles 20% RM000 72,727 11,200 83,927

Dimples 30% RM000 76,500 13,560 6,000 96,060

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Alternatively: Net assets FV adjustment ITA Depreciation Goodwill To CSFP Chuckles 20% RM000 360,000 18,000 ( 2,000) 376,000 x 20% = 75,200 8,727 83,927 Dimples 30% RM000 260,000 10,000 (1,800) (8,000) 260,200 x 30% = 78,060 18,000 96,060

Consolidated statement of comprehensive income for the year ended 31 December 2010 Revenue COS Gross profit Other operating expenses loss on re measurement (deemed disposal) PBT Tax Profit for the year OCI Total CI PFTY attributable to: Owners of parent NCI : Chuckles Dimples PFTY OCI attributable to: Owners of parent NCI: Chuckles Dimples Total OCI 320,000 + 270,000+180,000 12,000 110,000+70,000+70,000 12,000 + URP 1,200 150,000 + 115,000 +35,000 + ITA 2,000 + 1,875 + 1,800 + depreciation 2,000 RM000 758,000 (239,200) 518,800 (307,675) 211,125 (7,091) 204,034 (75,000) 129,034 18,000 147,034 RM 000 55,000 2,000 x 20% 50,000 1,800 2,000 x 30% 104,574 10,600 13,860 129,034 RM000 58,000 2,000 x 20% 55,000 1,800 2,000 x 30% 120,474 11,200 15,360 147,034

20,000+ 30,000 + 25,000 10,000 + 3,000 + 5,000

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Consolidated statement of financial position as at 31 December 2010 PPE ITA Goodwill AFS CA Share capital CSCI Other reserves NCI NCL CL 176,500 + 374,000 +270,000 + 10,000 + 18,000 8,000) 15,000 + 12,000 + 9,000 (2,000+ 1,875 + 1,800) 63,500 + 18,000 + 34,909 +8,727 23,000 + 19,000 +10,000 URP 1,200 RM000 840,500 30,325 125,136 23,500 50,800 1,070,261 490,000 164,274 54,000 179,987 133,000 49,000 1,070,261 (Total: 25 marks)

83,927 + 96,060 83,000 + 30,000 + 20,000 25,000 +15,000 + 9,000

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QUESTION 2 Dhuha Bhd Comprehensive Income Statement for the year ended 31 December 2010 RM000 RM000 Turnover 18,544 Cost of sales ( 9,000 + 180) (9,180) Gross profit 9,364 Selling & distribution expenses (1,840) Administrative expenses [ 5300 + 400(W1)] (5,700) Finance cost ( 210 + 210) (420) Change in FV of investment ( 13,000 10,000) 3,000 Profit before tax 4,404 Taxation: Current tax expense 830 Deferred tax expense (126) (704) Profit for the period 3,700 Other Comprehensive Income Surplus on revaluation of land Surplus on available for sale financial asset Total Comprehensive Income 600 1,200

1,800 5,500

Dhuha Bhd Statement of Changes in Equity for the year ended 31 December 2010 Share Share Retained Revaluatio Fair Share capital premiu earnings n reserve value Option m change Reserve RM RM RM RM s RM RM Balance b/d 16,000 9,200 2,568 Profit for the period 3,700 Share options 400 granted for the period Dividend paid (400) Surplus on 600 revaluation Available for sale 1,200 instruments Bonus issue 4,000 (4,000) Balance c/d 20,000 5,200 5,868 600 1,200 400

Total

RM 27,768 3,700 400 (400) 600 1,200

33,268

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Dhuha Bhd Statement of Financial Position as at 31 December 2010 RM000 Non-current assets Property, plant & equipment Intangibles: Investments Current assets Inventories Accounts receivables Cash at Bank (W4) Development Cost ( 12,800 + 3,000 + ( 1754 ( 1160 180) 256) 12,746 6,230 17,000 1,574 904 2,844 41,298 20,000 5,868 7,400 6,000 210 20 1,590 210 41,298

1,200)

Equity and liabilities Share capital Retained earnings Other reserves (5,200 + 600 + 1,200 + 400) Non-current liabilities 7% Loan notes Deferred tax liability Current liabilities Tax payable Accounts payables Accruals

Workings W1 Expenses and reserves for share options (share-based payment) Expenses RM 1 Apr 2010 10 x 8,000 x RM 5 400,000 Share Option Reserves RM 400,000

W2 Deferred Tax Balance at 1 Jan 2010 Def. Tax movement Balance at 31 Dec 2010 (840,000 x 25%) (126,000) 210,000 RM 336,000

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W3 Available for sale investment Cost FV Surplus on revaluation W4 Property Plant and Equipment Plant & Equipment Land Building (12,000 4,400) Cost/Rev Acc. dep Carrying value 2,668 (850) 1,818 5,000 5,000 7,600 (1,672) 5,928 12,746 (Total: 25 marks) RM million 2.8 4.0 1.2

QUESTION 3 a) Calculate the theoretical ex right price 1 share 4 shares @ RM3.80 5 shares 1 TERP @ RM3.6 = = 2.80 15.20 18.00

Calculate the weighted average number of shares 18,000 x 3/12 x 3.80/3.60 22,500 x 9/12 Basic EPS Revised EPS Calculate DEPS PAT b) 7,500 + interest saved 300/ 21,625 + (5,000/100 x 25 ) + ( 600,000 x1/3) = 33 sen SARs is an example of a cash-settled share-based transaction and, in accordance with IFRS2 Share-based Payments, are initially measured at their fair value at grant date and subsequently re-measured to fair value at each year end. The liability is re-measured and any difference is charged to the income statement as an expense. = 4,750 = 16,875 21,625 = 7,500/21,625 = 34 sen 30 sen x 3.6/3.8 = 28 sen

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In the year to 2009 Eligible employees (120-12-15) = 93 Equivalent cost of SARs = 93 employees x 2,000 rights x FVRM20 = RM3,720,000. Allocate over 3 year vesting period RM3,720,000/3 = RM1,240,000. charged to the income statement in the first year. SFP Liability RM1,240,000 SCI Expense RM1,240,000 In the year to 2010 Eligible employees (120-12-8-10) = 90 Equivalent cost of SARs = 90 employees x 2,000 rights x FVRM22 = RM3,960,000 Cumulative amount to be recognised as a liability = RM3,960,000 x 2/3 years = RM2,640,000. Less amount previously recognised = RM2,640,000 1,240,000 = RM1,400,000 charged to income statement in the second year SFP Liability SCI Expense c) i. RM2,640,000 RM1,400,000

An intangible asset can be recognised in the financial statements if it satisfies the following criteria: technical feasibility of the project intention to complete the intangible asset to use or sell it the ability to generate probable future economic benefits availability of adequate technical, financial and other resources to complete the development and to use or sell it the ability to reliably measure the expenditure attributable to the intangible

ii

The feasibility study of RM10,000, market testing and distribution of flyers of RM3,000 should be written off to SCI as work undertaken to establish the viability of a project is deemed not to be directly attributable to bringing the ITA into a condition for its intended use. The prototype design cost of RM2,000 and development work of RM3,000 should be capitalized as part of ITA and the cost of upgrading the machine of RM20,000 is capitalized as part of the tangible assets. Thus, the costs incurred will be dealt with as follows:

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SCI Feasibility study Prototype Market survey Development Machinery Cost of production/launch 10,000

SFP ITA 2,000 TA CA

3,000 3,000 20,000 30,000

*The RM30,000 can also be treated as part of inventory and disclosed in the SFP (Total: 25 marks) QUESTION 4 Media Bhd Cash Flow Statement for the year ended 31 December 2010 RM Cash Flow From Operating Activities Profit before tax Adjustments: Dividend income Interest expense Depreciation Increase in provision for doubtful debts Profit on disposal of machinery (W3) Discount on Loan notes (1,400,000 x 10%)(W9) Amortization of development cost (W4) Operating profit before working capital changes Decrease in trade receivable Increase in inventories Increase in trade payables Cash generated from operation Interest paid (W6) Tax paid (W2) Net cash flow from operating activities Cash Flow From Investing Activities Purchase of property, plant and equipment (W3) Proceeds from disposal of machinery (W3) Purchase of investments (W7) Development expenditure (note 4) Dividend received (note 7) Net cash used for investing activities 5,660 (600) 1,000 1,040 (500) (100) 140 2,600 9,240 2,500 (800) 540 11,480 (700) (1,800) 8,980 RM

(14,640) 500 (480) (4,000) 600

(18,020)

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Cash Flow From Financing Activities Proceeds from issue of ordinary share at premium 10,000 (W10) Payment to lease creditor (W5) (400) Proceeds from issue of loan notes (W9) 1,260 Dividend paid (W8) (1,900) Net cash flow for financing activities Net decrease in cash and cash equivalent Cash and equivalent at beginning of the period (note) Cash and cash equivalent at end of the period (note) Note: Cash and cash equivalent Cash at bank Short term investments Bank overdraft 2009 400 260 (1,000) (340)

8,960 (80) (340) (420)

2010 600 380 (1,400) (420)

Working: Retained Profits 1) tax (note 5) dividend payable (W8) bonus issue (W10) bal c/d 1,200 2,000 2,000 5,960 11,160 bal b/d PBT 5,500 5,660 11,160

2)

bank

Taxation 1,800 1,800

payable b/f IS (note 5) recoverable c/f

200 1,200 400 1,800

3)

bank b/d Revaluation Reserve fin lease bank Sales proceed CV Gain on disposal

Property, Plant and Equipment 24,000 Disposal 600 Depreciation 1,200 14,640 40,440 500,000 (400,000) 100,000 bal c/d

400 1,040 39,000 40,440

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4)

bal b/d Bank

Development Cost 6,800 amortization 4,000 10,800 bal c/d

2,600 8,200 10,800 3,600 1,200 4,800

5)

Bank bal c/d (2,000 + 2,400)

Lease Creditor 400 bal b/d (1,800 + 1,800) 4,400 4,800 PPE

6)

Bank bal c/d

Interest Payable 700 bal b/d 1,000 1,700 Inc Stmt

700 1,000 1,700

7)

bal b/d (1,300 260) Bank

Investments 1,040 480 1,520 bal c/d (1,900 380) 1,520 1,520 1,600 2,000 3,600 bal b/d Bank (1,400 x 90%) IS (1,400 x 10%) 5,200 1,260 140 6,600 20,000 2,000 2,000 10,000 34,000

8)

Bank (interim + final) (300 + 1,600) Bal c/d

Dividend Payable 1,900 bal b/d 1,700 3,600 Loan Notes RE (note 7) [300 + 1,700]

9) Bal c/d 6,600 6,600 OSC + SP 10) Bal c/d OSC SP 30,000 4,000 34,000

bal b/d - OSC - SP Bonus issue ( 1 x 20,000) 10 Bank

(Total: 25 marks)

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