A. MacPro Property Bhd acquired an investment property on 1 January 2015 and measured it using the cost model. On 1 January 2018, MacPro Property Bhd changed the accounting policy and used the fair value model to measure investment property. The acquisition cost of the property was RM70 million and the estimated useful life was 35 years. The fair values of the property were measured as below: Date RM (in million) 31/12/2015 72 31/12/2016 74 31/12/2017 78 31/12/2018 83 Profit after depreciation on investment property but before tax for 2017 and 2018 were RM80 million and RM95 million, respectively. Retained earnings brought forward on 1 January 2017 and 2018, were RM150 million and RM210 million, respectively. Assume that tax rate for 2017 and 2018 was 25%. REQUIRED: Discuss the accounting treatment of the above transaction in accordance to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors. Prepare the comparative financial statements for the year ended 31 December 2018 incorporating the accounting changes made by MacPro Property Bhd.
A. MacPro Property Bhd acquired an investment property on 1 January 2015 and measured it using the cost model. On 1 January 2018, MacPro Property Bhd changed the accounting policy and used the fair value model to measure investment property. The acquisition cost of the property was RM70 million and the estimated useful life was 35 years.
The fair values of the property were measured as below:
|
Date |
RM (in million) |
|
31/12/2015 |
72 |
|
31/12/2016 |
74 |
|
31/12/2017 |
78 |
|
31/12/2018 |
83 |
Profit after
REQUIRED:
- Discuss the accounting treatment of the above transaction in accordance to MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors.
- Prepare the comparative financial statements for the year ended 31 December 2018 incorporating the accounting changes made by MacPro Property Bhd.
B. MultiDuo Bhd is a multinational company producing semiconductor product since 2000. The semiconductor products are exported to Middle East, Hong Kong and Taiwan. The financial year end of the company is 31 March 2018. The company’s financial statements were authorised for issue by the board of directors on 30 June 2018. Following are among events that occurred in 2018.
1. On 15 June 2018, a flash flood destroyed one-third of a factory of MultiDuo Bhd and caused severe damaged to its semiconductor inventory. The carrying amounts of the factory and the inventory were RM20 million and RM5 million, respectively. The company is entitled to be reimbursed for the damages amounting RM15 million from insurance company.
2. The civil suit was brought against MultiDuo Bhd before the end of financial year. The lawyer advised the company that MultiDuo Bhd would lose the case and suffer a loss of RM1.5 million. On 25 May 2018, MultiDuo Bhd and the complainant agreed to settle it out of court and paid RM1 million.
REQUIRED:
Discuss the accounting treatment of the above events in the financial statements in accordance to MFRS 110 Events After the Reporting Period.
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