On 1 January 20x7, P Ltd paid S$500,000 to acquire a 60% interest in S Ltd when the fair value of S Ltds identifiable net assets was represented by share capital of S$300,000 and retained profit of S$300,000, except for (i) an unrecognized brand that had a market value of S$100,000, and (ii) freehold land that was accounted for at cost of S$100,000 but that had a market value of S$140,000.

On 1 January 20x7, P Ltd also paid RM180,000 to acquire a 30% interest in A Bhd (which gave P Ltd significant influence but not control over A Bhd) when the fair value of A Bhds identifiable net assets was represented by share capital of RM300,000 and retained profit of RM300,000.

Both P Ltd and S Ltd are companies incorporated in Singapore with the Singapore Dollar (S$) as their functional currency and presentation currency, whereas A Bhd is a company incorporated in Malaysia with the Ringgit Malaysia (RM) as its functional currency and presentation currency.

In August 20x7, the goodwill arising from P Ltds acquisition of S Ltd was deemed to be impaired and was written down by S$30,000.

During 20x7, P Ltd sold goods to S Ltd at cost plus 50%. The total intercompany sales for 20x7 was S$180,000. On 31 December 20x7, S Ltds closing inventory included goods purchased from P Ltd of S$90,000. During 20x8, S Ltd had sold all of the remaining inventory purchased from P Ltd to external parties. There were no intercompany sales (from P Ltd to S Ltd) during 20x8.

In April 20x8, S Ltd sold its freehold land to an external party for S$200,000.

During 20x8, S Ltd sold goods to P Ltd at cost plus 100%. The total intercompany sales (from S Ltd to P Ltd) for 20x8 was S$200,000. On 31 December 20x8, P Ltds closing inventory included goods purchased from S Ltd of S$50,000.

All dividends were declared out of 20x8 profits, and had been duly paid and received.

P Ltd and S Ltd adopt the Singapore Financial Reporting Standards (International) (SFRS(I)). All the relevant SFRS(I) that were issued by the Accounting Standards Council as at 1 January 2019 are assumed to have been effective on 1 January 20x7. A Bhd adopts the Malaysian Financial Reporting Standards which are largely similar to SFRS(I). As such, no adjustments are needed to ensure that A Bhds financial statements comply with SFRS(I). All the companies present annual financial statements with 31 December financial year-ends.

The group policy was to measure inventory using the first-in, first-out method, to measure property, plant, and equipment at cost, and to measure non-controlling interests at the acquisition date based on their proportionate share of the acquisition-date fair value of identifiable net assets of subsidiaries acquired.

Ignore tax effects, if any, arising from consolidation.

The 20x8 financial statements of the three companies were as follows:

(i) Statements of financial position as at 31 December 20x8.

(ii) Statements of profit or loss and other comprehensive income for the year ended 31 December 20x8.

(iii) Statements of changes in equity (partial) for the year ended 31 December 20x8

Additional information regarding A Bhds financial statements: The relevant exchange rates between RM and S$ were as follows:

In A Bhds 31 December 20x7 translated statement of financial position, the foreign currency translation reserve had a credit balance of S$15,000 and retained profit had a credit balance of S$183,000.

Required:

(a) Apply the appropriate accounting rules in Singapore Financial Reporting Standards (International) 1-21, The Effects of Changes in Foreign Exchange Rates, to translate A Bhds 20x8 financial statements ((i) statement of financial position, (ii) statement of profit or loss and other comprehensive income, and (iii) statement of changes in equity (partial)) into Singapore dollars (S$). (12 marks)

(b) Prepare all the consolidation journal entries necessary for the preparation of the consolidated statement of financial position and the consolidated statement of profit or loss and other comprehensive income for the P Ltd group for the year 20x8. Note that you are not required to prepare the consolidated financial statements. (30 marks)

(c) Verify the following items in the consolidated financial statements of the P Ltd group for the year 20x8, by providing independent calculation

(i) Retained profit in the consolidated statement of financial position; and

(ii) Non-controlling interests in the consolidated statement of financial position.(8 marks)

P Ltd S$'000 300 700 (454) 500 54 S Ltd S$'000 200 800 (300) A Bhd RM'000 400 900 (500) Land Equipment Accumulated depreciation Investment in S Ltd, at cost Investment in A Bhd, at cost Current assets: Inventory Trade receivable Cash 300 400 250 950 300 300 100 700 400 200 600 Current liabilities: Trade payable Tax payable 350 300 650 300 1,400 250 150 400 300 1,000 200 100 300 300 1,100 Net current assets Share capital Retained profit 400 1,000 1,400 300 700 1,000 300 800 1,100 P Ltd S$'000 3,000 1,500 1,500 S Ltd S$'000 1,400 800 600 100 A Bhd RM'000 2,200 1,200 1,000 Sales Less cost of sales Gross profit Add profit on sale of land Add dividend income Less expenses Profit before tax Less tax Profit after tax Other comprehensive income Total comprehensive income 60 660 250 900 300 600 450 150 300 700 300 100 200 600 300 200 Retained profit: Beginning balance Add profit for the year Less dividend Ending balance P Ltd S$'000 800 600 400 1,000 S Ltd S$'000 500 300 100 700 A Bhd RM'000 600 200 800 1 January 20x7 RM1.00 = S$0.30 Average rate for 20x7 RM1.00 = S$0.31 31 December 20x7 RM1.00 = S$0.32 Average rate for 20x8 RM1.00 = S$0.33 31 December 20x8 RM1.00 = S$0.34 P Ltd S$'000 300 700 (454) 500 54 S Ltd S$'000 200 800 (300) A Bhd RM'000 400 900 (500) Land Equipment Accumulated depreciation Investment in S Ltd, at cost Investment in A Bhd, at cost Current assets: Inventory Trade receivable Cash 300 400 250 950 300 300 100 700 400 200 600 Current liabilities: Trade payable Tax payable 350 300 650 300 1,400 250 150 400 300 1,000 200 100 300 300 1,100 Net current assets Share capital Retained profit 400 1,000 1,400 300 700 1,000 300 800 1,100 P Ltd S$'000 3,000 1,500 1,500 S Ltd S$'000 1,400 800 600 100 A Bhd RM'000 2,200 1,200 1,000 Sales Less cost of sales Gross profit Add profit on sale of land Add dividend income Less expenses Profit before tax Less tax Profit after tax Other comprehensive income Total comprehensive income 60 660 250 900 300 600 450 150 300 700 300 100 200 600 300 200 Retained profit: Beginning balance Add profit for the year Less dividend Ending balance P Ltd S$'000 800 600 400 1,000 S Ltd S$'000 500 300 100 700 A Bhd RM'000 600 200 800 1 January 20x7 RM1.00 = S$0.30 Average rate for 20x7 RM1.00 = S$0.31 31 December 20x7 RM1.00 = S$0.32 Average rate for 20x8 RM1.00 = S$0.33 31 December 20x8 RM1.00 = S$0.34