Since its inception two decades ago, AERA Bhd has achieved remarkable success in the undertaking of various construction, township, and infrastructure development projects. Incorporated on 7 February 1995 and listed on the Main Board of Bursa Malaysia on 2 February 1996, AERA Bhd has four business segments: township development, infrastructure, construction, and tourism Property, Plant and Equipment The beginning balance of property, plant and equipment (PPE) account as of 1 January 2022 showed the following balances: The acquisition of new PPE, disposals and impairment loss recognised for the year 2022 are as follows: The company uses straight-line depreciation method and closes its accounts on 31 December every year. Mr. Raqib is a new accountant at AERA Bhd. In December 2022, he was informed by the operation manager that the electrical system of Machine DR100 is broken and needs to be replaced by a new system. He learned that this problem serves as a signal of potential asset impairment. He asked Miss Rania, the account assistant, to hire an independent yaluer to estimate the market value of the machine. The current market price of the machine is RM96,500, and its selling cost is RM2,300. The management also estimates future cash flows expected to be derived from the use of the machine. The present value of the future cash flows is RM78,600. The carrying amount of the machine is RM86,000. Mr. Raqib is not sure whether to recognise an impairment loss for Machine DR100. Inventories As a property development company, AERA Bhd has grouped their inventories based on the undertaking projects and its percentage of completion. Currently, AERA has two ongoing projects and one completed project. The following information is available from the company's inventory records as at 31 December 2022. Cost to complete per unit is estimated based on the % for completion x cost per unit as at 31 December 2022. Mr Raqib is not literally agreed with the use of LCNRV approach to determine the value of company's inventory as he is in the opinion that it might distort the company's income data. Intangible dssets On 1 January 2015, AERA Bhd capitalised an intangible asset patent, which related to a new sustainable technology in processing oil palm, developed by the R\&D team of the company. The cost of the patent was RM8,000,000. The management of the company expected that the estimated future benefits from the patent will be consumed evenly for the next eight (8) years. On 31 December 2015, due to its great potential and positive market response, the company revalued the patent to market value of RM11,000,000. Earlier than what was forecasted by the company, its competitor managed to develop a more advanced processing technology at the end of 2021. Due to this latest development the company revalued its patent downwards to RM5,000,000 on 31 December 2021. The remaining useful life of the patent is expected to be four (4) years. Beside the patent, other intangible assets of AERA Bhd consist of: 1. A customer list purchased on 1 September 2015 at a cost of RM680,000. The company expected that 50% of the estimated future benefits from the customer list will flow into the company in 2015 and the rest will be generated evenly in the next three (3) years. ii. A trademark "AERA" that was registered on 1 August 2015. The cost to defend and register that trademark was RM300,000. This trademark has indefinite useful life and will be renewed every 5 years. One of the company's directors believes that the trademark should be amortised and an impairment test should only be carried out when the trademark is renewed. END OF CASE CASE INSTRUCTIONS: 1. Calculate depreciation for new PPE purchased for the year 2022. 2. Download a recent annual report of any public listed companies from Bursa Malaysia. Refer to the notes to the financial statements of property, plant and equipment of the downloaded annual report. Study the presentation and disclosure of property, plant and equipment of the company. It is better if you can find an annual report which reports an impairment loss of PPE in its notes to the financial statements. You also need to read the related paragraph in MFRS 116. Instruction: Prepare notes to the financial statements of property, plant and equipment for AERA Bhd. For report submission, please attach the notes to the financial statements (PPE section) of the downloaded annual report. 3. You are required to help Mr Raqib to: (CTPS question, refer rubric for marking) (i) Identify the problem facing by Mr Ragik (Problem identification) (ii) Analyse the problem by referring to MFRS 136 Impairment of Assets (Analysis of the problem) (iii) Help him to make a decision related to the impairment of Machine DR100 (Generation of solution, evaluation and decision making) (iv) Mr Ragib also asked you to explain to him the difference between impairment and revaluation because both are terms closely related to one another. 4. For inventories, determine (a) the LCNRV for each project and (b) the amount of writedown, if any, using a major project LCNRV evaluation. 5. Prepare the related journal entries. 6. Continuing with the above case, assume that in the subsequent period, market condition change, such that the net NRV increase to RM23,000,000 and the cost of inventory is maintain at the previous level. What would be the accounting treatment? 7. Based on the argument by Mr Ragib on the valuation of inventories: (CTPS Question) (i) Identify the main issue raise by him. (Identify issue) (ii) Analyse how the use of LCNRV rule might distort income data by giving your own example. (Analysis of the issue) \&(Decision based on solid evidence) (iii) Based on the above analysis, provide your general comment on how to deal with this issue. (Generate solution) 8. Identify subsequent measurement model adopted by AERA Bhd to account for the patent. Justify your answer. 9. Prepare journal entries necessary to record the cost of the patent, amortization expense, and increase or decrease in market (fair) value of the patent in 2021 to 2022. 10. Prepare journal entries necessary to record the cost of the customer list and amortisation expense in 2021 and 2022. 11. Prepare journal entries necessary for the trademark in 2020 and 2021. Discuss whether AERA Bhd should conduct an impairment test for the trademark on the financial year end 2021 and 2022 ? Since its inception two decades ago, AERA Bhd has achieved remarkable success in the undertaking of various construction, township, and infrastructure development projects. Incorporated on 7 February 1995 and listed on the Main Board of Bursa Malaysia on 2 February 1996, AERA Bhd has four business segments: township development, infrastructure, construction, and tourism Property, Plant and Equipment The beginning balance of property, plant and equipment (PPE) account as of 1 January 2022 showed the following balances: The acquisition of new PPE, disposals and impairment loss recognised for the year 2022 are as follows: The company uses straight-line depreciation method and closes its accounts on 31 December every year. Mr. Raqib is a new accountant at AERA Bhd. In December 2022, he was informed by the operation manager that the electrical system of Machine DR100 is broken and needs to be replaced by a new system. He learned that this problem serves as a signal of potential asset impairment. He asked Miss Rania, the account assistant, to hire an independent yaluer to estimate the market value of the machine. The current market price of the machine is RM96,500, and its selling cost is RM2,300. The management also estimates future cash flows expected to be derived from the use of the machine. The present value of the future cash flows is RM78,600. The carrying amount of the machine is RM86,000. Mr. Raqib is not sure whether to recognise an impairment loss for Machine DR100. Inventories As a property development company, AERA Bhd has grouped their inventories based on the undertaking projects and its percentage of completion. Currently, AERA has two ongoing projects and one completed project. The following information is available from the company's inventory records as at 31 December 2022. Cost to complete per unit is estimated based on the % for completion x cost per unit as at 31 December 2022. Mr Raqib is not literally agreed with the use of LCNRV approach to determine the value of company's inventory as he is in the opinion that it might distort the company's income data. Intangible dssets On 1 January 2015, AERA Bhd capitalised an intangible asset patent, which related to a new sustainable technology in processing oil palm, developed by the R\&D team of the company. The cost of the patent was RM8,000,000. The management of the company expected that the estimated future benefits from the patent will be consumed evenly for the next eight (8) years. On 31 December 2015, due to its great potential and positive market response, the company revalued the patent to market value of RM11,000,000. Earlier than what was forecasted by the company, its competitor managed to develop a more advanced processing technology at the end of 2021. Due to this latest development the company revalued its patent downwards to RM5,000,000 on 31 December 2021. The remaining useful life of the patent is expected to be four (4) years. Beside the patent, other intangible assets of AERA Bhd consist of: 1. A customer list purchased on 1 September 2015 at a cost of RM680,000. The company expected that 50% of the estimated future benefits from the customer list will flow into the company in 2015 and the rest will be generated evenly in the next three (3) years. ii. A trademark "AERA" that was registered on 1 August 2015. The cost to defend and register that trademark was RM300,000. This trademark has indefinite useful life and will be renewed every 5 years. One of the company's directors believes that the trademark should be amortised and an impairment test should only be carried out when the trademark is renewed. END OF CASE CASE INSTRUCTIONS: 1. Calculate depreciation for new PPE purchased for the year 2022. 2. Download a recent annual report of any public listed companies from Bursa Malaysia. Refer to the notes to the financial statements of property, plant and equipment of the downloaded annual report. Study the presentation and disclosure of property, plant and equipment of the company. It is better if you can find an annual report which reports an impairment loss of PPE in its notes to the financial statements. You also need to read the related paragraph in MFRS 116. Instruction: Prepare notes to the financial statements of property, plant and equipment for AERA Bhd. For report submission, please attach the notes to the financial statements (PPE section) of the downloaded annual report. 3. You are required to help Mr Raqib to: (CTPS question, refer rubric for marking) (i) Identify the problem facing by Mr Ragik (Problem identification) (ii) Analyse the problem by referring to MFRS 136 Impairment of Assets (Analysis of the problem) (iii) Help him to make a decision related to the impairment of Machine DR100 (Generation of solution, evaluation and decision making) (iv) Mr Ragib also asked you to explain to him the difference between impairment and revaluation because both are terms closely related to one another. 4. For inventories, determine (a) the LCNRV for each project and (b) the amount of writedown, if any, using a major project LCNRV evaluation. 5. Prepare the related journal entries. 6. Continuing with the above case, assume that in the subsequent period, market condition change, such that the net NRV increase to RM23,000,000 and the cost of inventory is maintain at the previous level. What would be the accounting treatment? 7. Based on the argument by Mr Ragib on the valuation of inventories: (CTPS Question) (i) Identify the main issue raise by him. (Identify issue) (ii) Analyse how the use of LCNRV rule might distort income data by giving your own example. (Analysis of the issue) \&(Decision based on solid evidence) (iii) Based on the above analysis, provide your general comment on how to deal with this issue. (Generate solution) 8. Identify subsequent measurement model adopted by AERA Bhd to account for the patent. Justify your answer. 9. Prepare journal entries necessary to record the cost of the patent, amortization expense, and increase or decrease in market (fair) value of the patent in 2021 to 2022. 10. Prepare journal entries necessary to record the cost of the customer list and amortisation expense in 2021 and 2022. 11. Prepare journal entries necessary for the trademark in 2020 and 2021. Discuss whether AERA Bhd should conduct an impairment test for the trademark on the financial year end 2021 and 2022