On 1 January 2019, Mache Bhd acquired 75% of the issued ordinary shares of Naro Plc, situated in the Narathiwat, Thailand, where the currency is the Thai Baht (THB). On that date, the retained profits of Naro Plc were THB500,000. The carrying amount of its net assets reflected its fair value. The main activity of Naro Plc is related to agricultural activities, including the processing of food products from farm produce. Profits are used to reinvest in the business for expansion purposes. The remittances of cash to the Malaysian parent are in the form of dividends. The financial statements of Mache Bhd and Naro Plc for the year ended 31 December 2020 and 2019 are as follows: Mache Bhd Statement of Financial Position as at 31 December 2020 2019 RM'000 RM'000 EQUITIES AND LIABILITIES Ordinary shares 16,600 16,600FAR610/FAR620 GP2 MARCH 2021 2 Retained earning 25,400 7,400 Long term loan 5,000 7,000 Payables 1,400 1,200 48,400 32,200 ASSETS Plant and equipment 25,000 17,000 Investment in Naro Plc 10,000 10,000 Inventory 1,500 2,500 Receivables 1,300 800 Bank 10,600 1,900 48,400 31,200 Mache Bhd Statement of Profit or Loss for the year ended 31 December 2020 2019 RM'000 RM'000 Revenue 96,000 65,300 Less: Cost of sales: Opening inventories 2,500 1,200 Purchases 59,000 51,300 Closing inventories (1,500) (2,500) 60,000 50,000 Gross profit 36,000 15,300 Depreciation (4,500) (2,000) General expenses (10,000) (8,500) Tax expense (3,500) (300) Profit for the year 18,000 4,500 Naro Plc Statement of Financial Position as at 31 December 2020 2019 THB'000 THB'000 EQUITIES AND LIABILITIES Ordinary shares 21,000 21,000 Retained earning 4,000 2,500 Long term loan 5,000 5,500 Payables 1,200 900 31,200 29,900FAR610/FAR620 GP2 MARCH 2021 3 ASSETS Plant and equipment 15,500 18,500 Freehold land 4,500 4,500 Inventory 4,600 2,600 Receivables 2,000 1,700 Bank 4,600 2,600 31,200 29,900 Naro Plc Statement of Profit or Loss for the year ended 31 December 2020 2019 THB THB'000 Revenue 50,300 52,400 Less: Cost of sales: Opening inventories 2,600 1,900 Purchases 40,000 41,200 Closing inventories (4,600) (2,600) 38,000 40,500 Gross profit 12,300 11,900 Depreciation (3,000) (3,000) General expenses (7,500) (6,500) Tax expense (300) (400) Profit for the year 1,500 2,000 Additional information 1. Naro Plc acquired all the property, plant and equipment on 1 January 2017 2. All property, plant and equipment (except for the freehold land) are depreciated on a straightline basis to write off the cost of each asset over their estimated useful lives. 3. In December 2020, Mache Bhd and Naro Plc respectively had declared final ordinary dividends of RM1,500,000 and THB600,000 for the financial year ended 31 December 2020. However, no records have been made in respect of the dividend. Both companies have not declared any dividend for the financial year ended 31 December 2019. 4. It is the group's policy to value the non-controlling interest at acquisition at its proportionate share of the fair value of the subsidiary's net assets. 5. The profit and loss are accrued evenly throughout the years. 6. The following are the exchange rates that is relevant for the preparation of the financial statements:FAR610/FAR620 GP2 MARCH 2021 4 THB to RM1 1 January 2017 2.15 1 January 2019 2.00 1 January 2020 2.40 31 December 2020 2.75 Average for the year ended 31 December 2019 2.30 Average for the year ended 31 December 2020 2.50 Required: a. Determine the functional currency of Naro Plc. and explain your choice. b. Recommend the most appropriate method to translate the financial statements of Naro Plc in accordance with MFRS 121, The Effects of Changes in Foreign Exchange Rates. c. Calculate the gain or loss on translation of goodwill arising from the acquisition of Naro Plc for the year ended 31 December 2020. d. Translate the statement of financial position and the statement of profit or loss for Naro Plc into Ringgit Malaysia to prepare the consolidated financial statements of Mache Bhd for the year ended 31 December 2020. e. Compute the exchange difference arising from the translation of the financial statements of Naro Plc for the year ended 31 December 2020. f. Prepare the consolidated statement of profit or loss of Mache Bhd for the year ended 31 December 2020. g. Prepare the consolidated statement of changes in equity of Mache Bhd for the year ended 31 December 2020. h. Prepare the consolidated statement of the financial position of Mache Bhd as at 31 December 2020.