ACC 2203 Class Exercise MFRS 124 Related Party Disclosures Question 1 Company ABC Bhd was incorporated on 15 January 2016. Immediately after incorporation, it issued 2,000,000 ordinary shares at RM1. Iqra' Bhd purchased 800,000 ordinary shares of Company ABC Bhd. Iqra' Bhd involved in the publication of university books. It later appointed Mr. Zakaria as one of its board's member. In its strategic discussions among the board's member, it was decided that Iqra' Bhd would expand its business activities to also include publication of primary and secondary school's textbooks. It was decided to have a joint venture contract with Ilmi Bhd (the joint venture contract is called Iqra'Ilmi Bhd), a company with vast experiences in the publication of primary and secondary school's textbooks. Ilmi Bhd also has another joint venture contract with Murni Bhd, a company speacilizing in the publications of magazines and novels. The joint venture contract is called IlmiMumi Bhd. In order to support the expansion activities of Iqra' Bhd, the company has raised a borrowings for an amount of RM500,000 from Bank Islam DEF Bhd. Mr. Zakaria also has his own financial planning. He has made some investments in Company XYZ Bhd by purchasing 30% of its shares. Mr. Zakaria has one son, Mr. Ahmad. Mr. Ahmad has acquired 60% of the shares of Company PQR Bhd. Mr. Zakaria's spouse, Puan Aminah is a member of the board of directors of Mawaddah Bhd. Required: a. Briefly explain the importance of identifying related parties to the reporting entity and provide two (2) examples of possible related parties' transactions. b. Identify six (6) possible related parties to Iqra's Bhd with justifications. (4 marks) (6 marks) c. Identify two (2) parties which are not related to Iqra' Bhd with justifications. (2 marks) d. Are the two joint venture contracts (i.e. Iqrallmi Bhd and IlmiMurni Bhd) related? Briefly explain. (2 marks) ACC 2203 Class Exercise MFRS 124 Related Party Disclosures Question 1 Company ABC Bhd was incorporated on 15 January 2016. Immediately after incorporation, it issued 2,000,000 ordinary shares at RM1. Iqra' Bhd purchased 800,000 ordinary shares of Company ABC Bhd. Iqra' Bhd involved in the publication of university books. It later appointed Mr. Zakaria as one of its board's member. In its strategic discussions among the board's member, it was decided that Iqra' Bhd would expand its business activities to also include publication of primary and secondary school's textbooks. It was decided to have a joint venture contract with Ilmi Bhd (the joint venture contract is called Iqra'Ilmi Bhd), a company with vast experiences in the publication of primary and secondary school's textbooks. Ilmi Bhd also has another joint venture contract with Murni Bhd, a company speacilizing in the publications of magazines and novels. The joint venture contract is called IlmiMumi Bhd. In order to support the expansion activities of Iqra' Bhd, the company has raised a borrowings for an amount of RM500,000 from Bank Islam DEF Bhd. Mr. Zakaria also has his own financial planning. He has made some investments in Company XYZ Bhd by purchasing 30% of its shares. Mr. Zakaria has one son, Mr. Ahmad. Mr. Ahmad has acquired 60% of the shares of Company PQR Bhd. Mr. Zakaria's spouse, Puan Aminah is a member of the board of directors of Mawaddah Bhd. Required: a. Briefly explain the importance of identifying related parties to the reporting entity and provide two (2) examples of possible related parties' transactions. b. Identify six (6) possible related parties to Iqra's Bhd with justifications. (4 marks) (6 marks) c. Identify two (2) parties which are not related to Iqra' Bhd with justifications. (2 marks) d. Are the two joint venture contracts (i.e. Iqrallmi Bhd and IlmiMurni Bhd) related? Briefly explain. (2 marks)
