Please refer to IFRS 9 - Financial Instruments

On 1 January 2015, Alma Bhd acquires 1,000,000 ordinary shares of Golden Heritage Bhd at the issue price of RM3.00 per share. Alma Bhd classifies the investment as at fair value through profit or loss. The terms of the issue include a call option that enables Golden Heritage Bhd to reacquire the ordinary shares from Alma Bhd at a price of RM5.00 should the market price of Golden Heritage Bhd's ordinary shares exceeds RM5.00. On 31 December 2015, Golden Heritage Bhd's ordinary shares close at RM5.70. Alma Bhd expects that Golden Heritage Bhd will exercise the call option in early 2016. Gemilang Bhd is a family business company that was established in Johor Baharu in 1990. The company involves in construction and infrastructure projects in Johor, Melaka and Singapore. As part of its expansion plan, on 1 March 2013, Gemilang Bhd acquired 5,000,000 ordinary shares of Tembaga Bhd at the issue price of RM3.50. Gemilang Bhd classified the investment as held for trading. The terms of the issue include a call option that enables Tembaga Bhd to reacquire the ordinary shares from Gemilang Bhd at a price of RM5.00 per share should the market price of ordinary shares of Tembaga Bhd exceed RM5.00. On 31 August 2013, the ordinary shares of Tembaga Bhd was RM5.70. Gemilang Bhd expects that Tembaga Bhd will exercise the call option by end 2013. Pandan Bhd leased a 20 storey building for 10 years from Antigona Ltd, an Australian company. The lease payments are denominated in Australian dollar. The functional currency of Pandan Bhd is Ringgit Malaysia and the functional currency of Antigona Ltd is Australian dollar. Adrian, a financial controller of Pandan Bhd is a very smart accountant and he always does his best to minimize the losses of the company. Explain () whether an embedded derivative exists and (ii) the appropriate accounting treatment for the above case. (8 markah/marks) On 1 January 2015, Alma Bhd acquires 1,000,000 ordinary shares of Golden Heritage Bhd at the issue price of RM3.00 per share. Alma Bhd classifies the investment as at fair value through profit or loss. The terms of the issue include a call option that enables Golden Heritage Bhd to reacquire the ordinary shares from Alma Bhd at a price of RM5.00 should the market price of Golden Heritage Bhd's ordinary shares exceeds RM5.00. On 31 December 2015, Golden Heritage Bhd's ordinary shares close at RM5.70. Alma Bhd expects that Golden Heritage Bhd will exercise the call option in early 2016. Gemilang Bhd is a family business company that was established in Johor Baharu in 1990. The company involves in construction and infrastructure projects in Johor, Melaka and Singapore. As part of its expansion plan, on 1 March 2013, Gemilang Bhd acquired 5,000,000 ordinary shares of Tembaga Bhd at the issue price of RM3.50. Gemilang Bhd classified the investment as held for trading. The terms of the issue include a call option that enables Tembaga Bhd to reacquire the ordinary shares from Gemilang Bhd at a price of RM5.00 per share should the market price of ordinary shares of Tembaga Bhd exceed RM5.00. On 31 August 2013, the ordinary shares of Tembaga Bhd was RM5.70. Gemilang Bhd expects that Tembaga Bhd will exercise the call option by end 2013. Pandan Bhd leased a 20 storey building for 10 years from Antigona Ltd, an Australian company. The lease payments are denominated in Australian dollar. The functional currency of Pandan Bhd is Ringgit Malaysia and the functional currency of Antigona Ltd is Australian dollar. Adrian, a financial controller of Pandan Bhd is a very smart accountant and he always does his best to minimize the losses of the company. Explain () whether an embedded derivative exists and (ii) the appropriate accounting treatment for the above case. (8 markah/marks)