TopCo Pte Ltd (TopCo) is a Singapore-incorporated company. It adopts Singapore Financial Reporting Standards (SFRS) and has 31 December accounting year ends and prepares yearly consolidated financial statements. Its functional and presentation currency is Singapore Dollar ($). Topco Ltd has a wholly-owned subsidiary incorporated in Malaysia, MiddleCo Sdn Bhd (MidCo). You have established that MidCo adopts Malaysian Financial Reporting Standards (MFRS) and prepares yearly financial statements with 31 December accounting year ends. Its functional and presentation currency is Ringgit Malaysia (RM). On 1 January 2021, TopCo acquired 2,000,000 shares of another unrelated Malaysian incorporated company, Damai Bhd (Damai), for long-term strategic investment. These shares were acquired using the excess funds of TopCo in cash. As this is a long-term strategic equity investment, TopCo accounted for them as Fair Value to OCI in accordance with FRS 109. Damai has a paid-up share capital of RM40,000,000 comprising 20,000,000 shares. The shares of Damai Bhd are quoted on Bursa Malaysia at RM10.00 per share on 1 January 2021, and at RM9.00 per share on 31 December 2021. On 1 July 2021, TopCo acquired RM1,000,000 of Kuching Bhds 5% bonds listed in Bursa Malaysia at par value. Kuching Bhd pays interest on bonds on 30 June and 31 December each year. TopCo classified this investment as fair value through profit or loss under FRS 109. Kuching Bhds bonds are traded at 104 as at 31 December 2021. The foreign exchange rate is RM1.00 = $0.30 on 1 January 2021, RM1.00 = $0.32 on 1 July 2021 and RM1.00 = $0.35 on 31 December 2021. The average exchange rate for the year 2021 is RM1.00 = $0.33. There are no substantive differences between MFRS and SFRS. Ignore any tax effects arising from the aforementioned transactions and events.

Question: The Board of Directors thought that had MidCo (instead of TopCo) acquired the shares of Damai, there would be a reduction in the exchange difference recorded in the consolidated financial statements of TopCo. As you are the group accountant of TopCo, the Board has requested that you help them understand the impact on the consolidated financial statements of TopCo had the acquisition of shares not been made by TopCo but made by MidCo instead using the excess funds of MidCo in RM. Analyse and prepare a memo on the said difference to be presented to the Board of Directors. (16 marks)