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acc206: (b) The board of directors of KLM Pte Ltd (KLM) has decided on 18 December 20X1 to close its factory in Malaysia and move

acc206:

(b) The board of directors of KLM Pte Ltd ("KLM") has decided on 18 December 20X1 to close its factory in Malaysia and move it to Vietnam. The decision was based on a detailed formal plan of re-structuring as required by FRS 37 "Provisions, Contingent Liabilities and Contingent Assets". The decision was conveyed to the management personnel at the headquarters in Germany. The cost of restructuring the operation in Malaysia as per the plan was $700,000.

Illustrate and explain how KLM should treat this re-structuring in its financial statements for the year ended 31 December 20X1. (8 marks)

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