IFRS 10- COMPLEX - INDIRECT SUBSIDIARY

On 1 January 2007, Maceala Bhd (MB) acquired 80% interest in the equity capital of Nealy Sdn Bhd (NSB) for a cash consideration of RM300 million. The general reserve, revaluation reserve and retained profits of NSB at the date of acquisition were RM40 million, RM50 million and RM30 million respectively. On the stated date as well, MB acquired 20% interest in the equity capital of Camelia Sdn Bhd (CSB) for RM70 million.

On the same date, NSB purchased 60% interest in ordinary shares of Camelia Sdn Bhd (CSB) at a cost of RM150 million. The remaining shares were bought by the other shareholders. The general reserve, revaluation reserve and retained profits of CSB at the date of acquisition were RM20 million, RM40 million and RM20 million respectively.

The following are the summarized accounts of MB, NSB and CSB for the year ended 31 December 2009.

	MB (RM000)	NSB (RM000)	CSB (RM000)
Share capital of RM1 each	600,000	200,000	100,000
Revaluation Reserve	20,000	60,000	50,000
Share premium	50,000	-	-
General reserve	163,400	50,000	30,000
Retained profits	221,400	55,500	40,700
Long-term loans	-	100,500	41,300
	1,055,000	466,000	262,000
Property, plant & equipment, at NBV	430,000	330,000	300,000
Investments in subsidiary, at cost	370,000	150,000	-
Current assets
Stocks	77,000	30,000	23,000
Debtors	70,000	80,000	57,000
Loan to Subsidiaries	200,000
Bank balances	10,000	6,000	4,000
Current liabilities
Creditors	(80,000)	(25,000)	(20,000)
Taxation	(6,000)	(1,000)	-
Loan from Parent	-	(100,000)	(100,000)
Bank borrowings	(16,000)	(4,000)	(2,000)
	1,055,000	466,000	262,000
	MB (RM000)	NSB (RM000)	CSB (RM000)
Revenue	500,000	100,000	100,000
Operating expenses	(200,000)	(50,000)	(40,000)
Profit from operations	300,000	50,000	60,000
Finance costs	(10,000)	(5,000)	(5,000)
Dividends received	50,000	30,000	-
Profit before tax	340,000	75,000	55,000
Taxation	(88,400)	(19,500)	(14,300)
Profit after tax	251,600	55,500	40,700
Retained profits brought forward	70,000	50,000	50,000
Available for appropriation	321,600	105,500	90,700
Dividends paid	(100,000)	(50,000)	(50,000)
Retained profits carried forward	221,600	55,500	40,700

Additional information:

a)On 31 December 2009, MB held stocks purchased from NSB amounting to RM3 million (invoiced price) while CSB held stocks purchased from MB amounting to RM2 million. The intercompany sales in the current year amounted to RM5 million in total. These sales had a profit margin of 20% of invoice price.

b)On 1 January 2009, MB purchased Property, Plant & Equipment (PPE) from CSB for transfer price of RM60 million which has cost CSB RM40 mill. The group depreciates fixed assets of this nature using straight-line basis over 5 years. CSB treated the purchased as another PPE.

c). The intercompany loans were given at 10% per annum. The loans were given on 1 Jan 2009. These interests have been recorded in the books of groups as revenue and finance costs. Both subsidiaries have not paid their interest as at 31 December 2009.

d). MB provided consultancy services to NSB. For the year 2009, the management fees were RM10 million. NSB classified the fees as finance costs while MB treated the fees as normal revenue.

e). No impairment of Goodwill was recorded for the year.

f). Assume an income tax rate of 26%. Ignore tax-effect on intercompany transactions.

Required:

1). Raise general journals to record all the elimination journals for the above group under one stage method.

2). Prepare worksheet for the group for the year ended 31 December 2009.