QUESTION 3 Gen Bhd. is the parent company of a multinational listed group of companies. The group's current financial year end is 30 November 2020. Impairment of MY Bond On 30 November 2019, Gen Bhd. bought 5% MY bonds amounted to RM5,000,000 par value. The bonds are repayable on 30 November 2022 at the effective interest rate of 8% Gen Bhd's business model is to collect contractual cash flow over the asset's life. At 30 November 2019. MY bonds were classified as low risk, hence 12-month expected credit losses are estimated to be RM5,000 On 30 November 2020, MY bonds paid the coupon interest, however, the risks associated with the bonds were deemed to have increased significantly on this date. The present value of the repayments for the year ended 30 November 2021 were expected to be RM231,481.5 and the probability of default is 3%. On 30 November 2020, it is also expected that no additional coupon payments would be received during the year ended 30 November 2022, but only part of the nominal value would be repaid. The present value of these cash deficits was assessed to be RM3,429,335 with a 5% likelihood of default in the year ended 30 November 2022. Acquisition of H Sdn. Bhd. On 1 December 2019. Gen. Bhd. bought 100% of H Sdn Bhd's equity shares with the intention for sale and did not wish to actively participate in the operation of H. Sdn. Bhd. Immediately after the acquisition, Gen Bhd. started to look for a buyer for H Sdn. Bhd. and felt that the sale would be completed latest by 30 September 2020. A buyer for H Sdn. Bhd. was found in July 2020, but due to an unforeseen legal dispute over a contingent liability disclosed in H Sdn. Bhd.'s financial statements, the sale had not yet been finalised as at now. The sale is scheduled to be accomplished by the end of 2020. You are required to: a) Discuss how the MY bonds should be accounted for in the financial statement of Gen Bhd. as at 30 November 2020 according to relevant IAS or IFRSs or MFRSs. Show your calculation (10 marks) 6) Suggest how Gen Bhd should account for the sale of H Sdn. Bhd. in the financial statements at 30 November 2020 according to relevant IAS or IFRSs or MFRSs. (10 marks) [Total: 20 marks] QUESTION 3 Gen Bhd. is the parent company of a multinational listed group of companies. The group's current financial year end is 30 November 2020. Impairment of MY Bond On 30 November 2019, Gen Bhd. bought 5% MY bonds amounted to RM5,000,000 par value. The bonds are repayable on 30 November 2022 at the effective interest rate of 8% Gen Bhd's business model is to collect contractual cash flow over the asset's life. At 30 November 2019. MY bonds were classified as low risk, hence 12-month expected credit losses are estimated to be RM5,000 On 30 November 2020, MY bonds paid the coupon interest, however, the risks associated with the bonds were deemed to have increased significantly on this date. The present value of the repayments for the year ended 30 November 2021 were expected to be RM231,481.5 and the probability of default is 3%. On 30 November 2020, it is also expected that no additional coupon payments would be received during the year ended 30 November 2022, but only part of the nominal value would be repaid. The present value of these cash deficits was assessed to be RM3,429,335 with a 5% likelihood of default in the year ended 30 November 2022. Acquisition of H Sdn. Bhd. On 1 December 2019. Gen. Bhd. bought 100% of H Sdn Bhd's equity shares with the intention for sale and did not wish to actively participate in the operation of H. Sdn. Bhd. Immediately after the acquisition, Gen Bhd. started to look for a buyer for H Sdn. Bhd. and felt that the sale would be completed latest by 30 September 2020. A buyer for H Sdn. Bhd. was found in July 2020, but due to an unforeseen legal dispute over a contingent liability disclosed in H Sdn. Bhd.'s financial statements, the sale had not yet been finalised as at now. The sale is scheduled to be accomplished by the end of 2020. You are required to: a) Discuss how the MY bonds should be accounted for in the financial statement of Gen Bhd. as at 30 November 2020 according to relevant IAS or IFRSs or MFRSs. Show your calculation (10 marks) 6) Suggest how Gen Bhd should account for the sale of H Sdn. Bhd. in the financial statements at 30 November 2020 according to relevant IAS or IFRSs or MFRSs. (10 marks) [Total: 20 marks]
