IFRS 10- COMPLEX-INDIRECT SUBSDIARY

On 1 January 2005, A Bhd acquired a 60% interest and a 30% interest in the equity capital of B Bhd and C Bhd for a cash consideration of RM250 million and RM70 million. The general reserve and retained profits of B Bhd at the date of acquisition were RM40 million and RM30 million respectively.

On the same date, B Bhd purchased 60% interest in ordinary shares of C Bhd at a cost of RM80 million. The remaining shares were bought by the other shareholders. The retained profits of C Bhd at the date of acquisition were RM20 million.

The following are the summarized accounts of AB, BB and CB for the year ended 31 December 2006.

	A Bhd (RM000)	B Bhd (RM000)	C Bhd (RM000)
Share capital of RM1 each	600,000	200,000	100,000
Revaluation Reserve	30,000	-	-
Share premium	100,000	-	-
General reserve	60,000	40,000	-
Retained profits	55,200	33,220	22,840
Long-term loans	160,000	100,000	40,000
	1,005,200	373,220	162,840
Property, plant & equipment, at NBV	601,800	274,520	140,240
Loan to subsidiaries	20,000
Investments in subsidiary, at cost	250,000	80,000	-
Investment in C, at cost	70,000	-
Current assets
Stocks	77,000	32,000	21,000
Debtors	74,800	28,000	22,200
Fixed deposits	3,600	1,500	-
Bank balances	10,000	6,000	4,000
Current liabilities
Creditors	(80,000)	(40,000)	(20,000)
Taxation	(6,000)	(4,800)	(2,600)
Bank borrowings	(16,000)	(4,000)	(2,000)
	1,005,200	373,220	162,840
	A Bhd (RM000)	B Bhd (RM000)	C Bhd (RM000)
Revenue	112,760	65,160	44,920
Operating expenses	(90,240)	(53,400)	(37,800)
Profit from operations	22,520	11,760	7,120
Finance costs	(7,200)	(4,200)	(1,920)
Dividends received (net)	9,000	3,600	-
Profit before tax	24,320	11,160	5,200
Taxation	(6,320)	(3,940)	(1,360)
Profit after tax	18,000	7,220	3,840
Retained profits brought forward	69,200	38,000	25,000
Available for appropriation	87,200	45,220	28,840
Dividends paid (net)	(32,000)	(12,000)	(6,000)
Retained profits carried forward	55,200	33,220	22,840

Additional information:

(a). The directors of AB considered that the freehold land of BB, included in the Property, Plant & Equipments (PPE) at RM150 million, to be undervalued by RM20 million on 1 January 2005. The land has not been revalued in the books of BB.

(b). On 31 December 2006, AB held stocks purchased from CB amounting to RM2 million (invoiced price). The intercompany sales in the current year amounted to RM6 million. These sales had a profit margin of 25%.

(c)CB had also purchased PPE from BB for transfer price of RM30 million. Profit margin for this sale to BB is 20%. The group depreciates fixed assets of this nature using straight-line basis over 5 years. CB treated this purchased as another PPE whereas BB treated the sales as normal sales.

(d). Intercompany loans are at 10% per annum. At the end of the year, interests owed to AB have not been paid by both subsidiaries. BB and CB treated the loans as long term in nature.

(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:

Prepare the consolidated financial statements of A Bhd and the group for the year ended 31 December 2006. Please present your answers in the worksheets form.