Question

Public Berhad acquired 90% of the ordinary shares in Queen Berhad on 1 August 2018 at...

  1. Public Berhad acquired 90% of the ordinary shares in Queen Berhad on 1 August 2018 at a cost of RM480,000. On that date the net assets of Queen Berhad amounted to RM500,000. In the year ended 30 June 2019, Public Berhad reported a profit of RM210,000 and Queen Berhad of RM120,000.

Trading conditions indicated that the goodwill in Queen Berhad may be impaired and a review found that it was indeed impaired by 50%. It is Public Berhad group policy to measure the non-controlling interest as a percentage of net assets. By assuming the revenue and expenses accrued evenly throughout the year, calculate the profit for the year ended 30 June 2019 before allocation to the group owners and the non-controlling interest.

  1. Explain the following statements regarding group accounting which is/are

correct.

  1. Only the group's share of the assets of a subsidiary is reflected in the consolidated statement of financial position.
  2. An investment in an associate is initially reflected in the consolidated statement of financial position at its cost.
  3. The value of share capital in a consolidated statement of financial position will include the share capital of both the investor and the investee.
  4. The value of share capital in a consolidated statement of financial position will include the share capital of the investor only.
  5. Where a group comprises a parent company and an investee over which the parent has significant influence, consolidated accounts must be prepared in accordance to acquisition method.
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Answer #1

Answer i) Incorrect; All assets of the subsidiary are shown in the consolidated statement of financial position.

Answer ii) Correct; An investment in an associate is initially reflected in the consolidated statement of financial position at its cost and subsequently adjusted to reflect investor's share in associates' net asset.

Answer iii) Incorrect; The value of share capital in the consolidated financial statement will include the share capital of just the investor

Answer iv) Correct; The value of share capital in the consolidated financial statement will include the share capital of just the investor

Answer v) Correct; Where a group comprises a parent company and an investee over which the parent has significant influence, consolidated accounts must be prepared in accordance to acquisition method

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