Mutiara Bhd (MB) is a holding company which operates mainly in construction and property development industry. The company’s annual report for the year ended on 31 December 2016 had already been prepared by the company’s accountant. On 3 March 2017, MB’s board of directors announced that the 2016 annual report will be issued on 30 April 2017. The following transactions have not been included in the preparation of MB’s financial statement for 2016:

1. On 1 June 2016, MB issued RM500,000, 10% , 5-year notes at par to finance a plant expansion in Kulim, Kedah. MB is to pay annual payment of interest every 1 June and the existing plant is currently pledged for collateral for the loan. In 2016, mistakenly ignore any entry regarding the accrued interest.

2. As at 31 December 31 2016, MB had a receivable of RM400,000 from Pelita Sdn Bhd. On 26 February 2017, MB has been informed that Pelita Sdn Bhd has been placed under receivership. There is no provision of doubtful debt that had been 4 made in respect of this debt as it was considered to be wholly collectible. MB expects to collect only 30 per cent of this amount subsequent to the completion of receivership process.

3. On 1 January 2016, MB proposed to change its depreciation base on one of its major plant asset from a 50-year useful life to a 20-year useful life. If this changed have been made in prior year, retained earnings for 2015 would have been RM200,000 less. The effect of this change on 2016 income alone is a reduction of RM40,000.

4. On 5 February 2017, as part of its expansion strategy in Langkawi, MB acquired another 550,000 ordinary shares of par value of RM1.00 each, representing 25 per cent of equity interest in Nilam Sdn Bhd for a total consideration of RM1.65 million. Consequent to the acquisition, Nilam Sdn Bhd has become a whollyowned subsidiary company of MB.

5. In early January 2014, MB started to breed chickens and ducks in one of its operating segment in Langkawi. On 1 January 2016, MB decided to change its inventory valuation method of its biological assets from cost method to the new fair value method in accordance with MFRS 141 Agriculture. Accordingly, MB would make an assessment on the fair value of all changes in prices and changes in the physical assets of its ducks and chickens at every reporting date.

REQUIRED:

In accordance with MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors and MFRS 110 Events after the Reporting Period,

(i) Classify each of the above transaction into: either a change of accounting policy (Policy), change of accounting estimates (Estimates), an error (Error) or subsequent events after the reporting dates (Events),

(ii) Identify the accounting treatment,

(iii) Explain the appropriate accounting treatment for the transactions. Prepare your answers based on the following format:

(i) Transaction

(ii) Accounting treatment

(iii) Detail of accounting treatment