The draft statements of financial position of the three entities at 31 December 2021 are as follows: Aster Peony RM'000 Salvia RM'000 RM'000 Assets Non-current assets Property, plant and equipment (Note 2) Investments (Note 1 and 3) 180,000 610,000 394,500 1,004,500 310,000 Nil 310,000 Nil 180,000 Current assets Inventories Trade receivables (Note 5) Cash and cash equivalents 140,000 95,000 16,000 251,000 1,255,500 85,000 70,000 13,000 66,000 59,000 11,000 136,000 316,000 168,000 Total assets 478,000 Equity and liabilities Share capital (RM1 shares) Retained earnings Other components of equity (Notes 4) 240,000 574,500 202,000 1,016,500 120,000 168,000 Nil 288,000 120,000 59,000 Nil 179,000 60,000 Non-current liabilities Long-term borrowings (Note 6) Deferred tax Total non-current liabilities 100,000 59,000 159,000 70,000 38,000 108,000 35,000 95,000 32,000 Current liabilities Trade and other payables (Note 5) Short-term borrowings Total current liabilities Total equity and liabilities 60,000 20,000 80,000 10,000 52,000 30,000 82,000 478,000 42,000 1,255,500 316,000 1. Summary of Peony's investments The investments figure in the individual financial statements of Peony is made up as follows: Investment in Salvia (Note 2) Investment in Aster (Note 3) Other equity investments (Note 4) RM'000 236,500 145,000 13,000 394,500 2. Peony's investment in Salvia On 1 January 2017, Peony acquired 90 million shares in Salvia by means of a share exchange of two shares in Peony for every three shares acquired in Salvia. On 1 January 2017, the market value of Peony share was RM3.90. Peony incurred directly attributable costs of RM2.5 million on acquisition of Salvia relating to the cost of issuing its own shares On 1 January 2017, the individual financial statements of Salvia showed retained earnings of RM60 million The directors of Peony carried out a fair value exercise to measure the identifiable assets and liabilities of Salvia at 1 January 2017. The following matters emerged: 2.1 Property which had a carrying amount of RM150 million (land component RM45 million) had an estimated fair value of RM210 million (and component RM66 million). The buildings component of the property had an estimated remaining useful life of 30 years at 1 January 2017 2.2 Plant and equipment which had a carrying amount of RM122 million had an estimated fair value of RM145 million. The estimated remaining useful life of the plant at 1 January 2017 was four years. 2.3 On 1 January 2017, the directors of Peony identified a brand name relating to Salvia which had a fair value of RM25 million. This brand name was not recognised in the individual financial statements of Salvia as it was internally developed. The directors of Peony considered that the useful life of the brand name was 25 years from 1 January 2017 2.4 The fair value adjustments have not been reflected in the individual financial statements of Salvia. In the consolidated financial statements, the fair value adjustments will be regarded as temporary differences for the purposes of calculating deferred tax. The rate of deferred tax to apply to temporary differences is 20% 2.5 No impairment of the goodwill on acquisition of Salvia has been evident since 1 January 2017. On 1 January 2017, the directors of Peony initially measured the non-controlling interest in Salvia at its fair value on that date. On 1 January 2017, the fair value of an equity share in Salvia (which can be used to measure the fair value of the non-controlling interest) was RM2.35. 3. Peony's investment in Aster On 1 January 2019, Peony acquired 42 million shares in Aster by means of a cash payment of RM145 million Aster's issued share capital at that date was 120 million shares. On 1 January 2019 and 31 December 2021, the individual financial statements of Aster showed retained earnings of RM40 million and RM70 million respectively. Since 1 January 2019, no other investor has owned more than 2% of the shares of Aster. 4. Other equity investments by Peony Peony has a portfolio of equity investments which are classified in accordance with MFRS 9 Financial Instruments as 'fair value through profit or loss'. The carrying amount included in the financial statements of Peony represents the fair value of the portfolio at 1 January 2018, which has been correctly adjusted for purchases and disposals in the year. The fair value of the portfolio at 31 December 2021 was RM13.8 million. 5. Trade receivables and payables On 29 December 2021, Peony made a payment of RM8 million to Salvia to eliminate the intra-group balances at that date. This payment was received and recorded by Salvia on 2 January 2022 6. Long-term borrowing On 1 January 2021, Peony issued 60 million RM1 loan notes at par. The annual rate of interest (payable in arrears) on the loan notes is 6%. The loan notes are repayable at par on 31 December 2030. As an alternative to repayment, the holders of the loan notes can elect to convert their loan notes into equity shares of Peony on 31 December 2030. Had the conversion option not been available, the investors in the loan notes would have required an annual return of 9%. Discount factors which may be relevant at 6% and 9% are as follows: Discount rate Present value of RM1 receivable in 10 years Present value of RM1 receivable at the end of years 1-10 RM7.36 RM6.42 6% 55.8 cents 42.2 cents 9% In preparing the draft financial statements for the year ended 31 December 2021, the directors of Peony credited RM60 million to long-term borrowings and showed the interest paid to the investors as a finance cost. 7. Lease On 1 January 2020, Peony began to lease a property under a 15-year lease. The annual rate of interest implicit in the lease was 6%. The lease rentals payable by Peony were RM12 million, payable annually in arrears. The lease does not transfer ownership of the property to Peony at the end of the lease term. The lease contains no option for Peony to purchase the property at the end of the lease term. On 1 January 2020, Peony incurred direct costs of RM6 million in arranging this lease. Using a discount rate of 5%, the cumulative present value of RM1 payable annually in arrears for fifteen years is RM9.71. No transaction relating to the lease were recorded in the book except the payment for direct cost and lease rental payment were charged to expenses. Note: Your working should be rounded to the nearest RM000 Required: Prepare the consolidated statement of financial position of Peony at 31 December 2021. You need only consider the deferred tax implications of any adjustments you make where the question specifically refers to deferred tax. (40 Marks)