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CLASS EXERCISE 5A
COMPLEX STRUCTURE : FATHER-SON-GRANDSON STRUCTURE

QUESTION 1

On 31 December 2010, Lehman Bhd acquired Manyman Bhd for a consideration of

RM80,000,000. On that date, the net assets of Manyman Bhd were share capital of
RM70,000,000 and retained profits of RM20,000,000.

On 31 December 2010, Manyman Bhd acquired Noman Bhd for consideration of

RM52,000,000. On that date, the net assets of Noman Bhd were RM50,000,000 share capital and
retained profits of RM15,000,000.

The Statement of Financial Position of Lehman Bhd, Manyman Bhd and Noman Bhd as at 31
December 2015 are as follows:

Statement of Financial Position

as at 31 December 2015
Lehman Bhd Manyman Bhd Noman Bhd
RM’000 RM’000 RM’000
Ordinary share capital of RM1 each 100,000 70,000 50,000
Retained profits 75,000 55,000 25,000
175,000 125,000 75,000

Investment
56,000,000 shares in Manyman Bhd 80,000 - -
40,000,000 shares in Noman Bhd - 52,000 -
Other non-current assets 50,000 20,000 35,000
Current assets 45,000 53,000 40,000
175,000 125,000 75,000

Required:
a) Calculate the ownership of the parent and non-controlling interest in the subsidiaries
Manyman Bhd and Noman Bhd and complete the table below.
Manyman Bhd Noman Bhd
Group:
Direct
Indirect

Minority shareholder:
Direct
Indirect
100% 100%

b) Using acquisition date share of identifiable net assets to measure the non-controlling
interest, calculate the goodwill on combination.

c) Using consolidation of consolidation method (multiple stage method), prepare the

consolidation journal entry and the Consolidated Statement of Financial Position of
Lehman Bhd and its subsidiaries as at 31 December 2015.
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Solution:

a)
Manyman Bhd Noman Bhd
Group
Direct 80% -
Indirect (80% x - 64%
80%)

Minority Interest
Direct 20% 20%
Indirect (20% x - 16%
80%)
100% 100%

b)
Goodwill on consolidation:
Manyman Noman
(RM) (RM)
Aggregate of:
Cash consideration 75,000 52,000
NCI at net asset
 20% x RM90,000 18,000
 20% x RM65,000 13,000
98,000 65,000

Less: Net assets

Share capital 70,000 50,000
Retained profit 20,000 15,000
90,000 65,000
Goodwill on consolidation 8,000 0

c) Consolidation JE

(i) Manyman Bhd + Noman Bhd

RM’00 RM’00
0 0
i Share capital (N) [80% x 50k] 40
Retained profit (N) – pre acquisition [80% x 12
15k]
Investment in N Bhd 52
(to eliminate investment account)
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ii Retained profit (N) [80% x (25k-15k)] 8

Retained profit (M) 8
(to transfer post-acquisition retained profit)

ii Share capital (N) [20% x 50k] 10

i
Retained profit (N) [20% x 25k] 5
NCI in Financial Position 15
(to record NCI)

ii) Lehman Bhd + (Manyman Bhd + Noman Bhd)

RM’000 RM’000
i Share capital (M) [80% x 70k] 56
Retained profit (M) – pre acquisition [80% x 20k] 16
Goodwill on consolidation 8
Investment in M Bhd 80
(to eliminate investment account)

ii Retained profit (M) [80% x (55k-20k+8k)] 34.4

Retained profit (L) 34.4
(to transfer post-acquisition retained profit)

ii Share capital (M) [20% x 70k] 14

i
Retained profit (M) [20% x (55k+8k)] 12.6
NCI in Financial Position 26.6
(to record NCI)

(b) (ii)

Lehman Bhd and its subsidiaries

Consolidated Statement of Financial Position
as at 31 December 2015
RM’00
0
Goodwill on consolidation 8.0
Other non-current assets (50k+20k+35k) 105.0
Current assets (45k+53k+40k) 138.0
251.0

Share capital (100k+70k+50k-70k-50k) 100.0

Retained profit 109.4
(75k+55k+25k-12-8k-+8k-5k-16k-34.4k+34.4k-
12.6k)
NCI (15k+26.6k) 41.6
251.0
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QUESTION 2

The share capital of Bijak Bhd comprises 500,000 ordinary shares. The share capital of Pandai
Bhd and Cerdik Bhd each comprises of 100,000 ordinary shares.

Bijak Bhd acquired 60% in Pandai Bhd for cash consideration of RM60,000 in January 2011
when Pandai Bhd was incorporated with share capital of RM100,000. Bijak Bhd acquired
additional 20,000 shares in Pandai Bhd for cash consideration of RM50,000 on 1 April 2016
when Pandai Bhd’s retained profit was RM100,000.

Bijak Bhd acquired 20% of Cerdik Bhd for cash consideration of RM60,000 on 2 February 2016
when Cerdik Bhd’s shares were traded at RM3.00 per share. On 10 October 2016, when Cerdik
Bhd’s shares were traded RM3.50 per share, Bijak Bhd acquired additional 40% of Cerdik Bhd
for cash consideration of RM140,000. Cerdik Bhd’s retained profit was RM150,000 and
RM180,000 on 2 Feb 2016 and 10 October 2016 respectively.

The financial statements of Bijak Bhd and its subsidiaries Pandai Bhd and Cerdik Bhd for the
year 2018 are as follows:

Statement of Profit or Loss and Other Comprehensive Income

for the year ended 31 December 2018
Bijak Bhd Pandai Cerdik
Bhd Bhd
RM’000 RM’000 RM’000
Sales 500 600 400
Less : Cost of sales 200 250 150
Gross profit 300 350 250
Less: Operating expenses 150 170 130
Profit before tax 150 180 120
Less : Tax 50 60 40
Profit after tax 100 120 80
Other comprehensive income: - - -
Total comprehensive income 100 120 80

Statement of Financial Position as at 31 December 2018

Bijak Bhd Pandai Cerdik
Bhd Bhd
RM’000 RM’000 RM’000
Investment, at cost
80,000 shares in Pandai Bhd 110 - -
60,000 shares in Cerdik Bhd 200 - -
Other assets 990 800 700
1,300 800 700
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Share capital 500 100 100

Retained profit 500 420 280
Current liabilities 300 280 320
1,300 800 700

Statement of Change in Equity (partial) for the year ended 31 December 2018
Bijak Bhd Pandai Cerdik
Bhd Bhd
RM’000 RM’000 RM’000
Beginning retained profit 400 300 200
Add: profit for the year 100 120 80
Ending retained profit 500 420 280

Additional information:
(i) During the year 2018, Bijak Bhd sold goods of RM100,000 to Pandai Bhd. At 31
December 2018, the stock of Pandai Bhd included goods bought from Bijak Bhd with
unrealized profit of RM20,000.

(ii) There has been no impairment of goodwill.

(iii) Non-controlling interest has been measured based the its share of the acquisition-date fair
value identifiable net assets acquired.

(iv) The group has adopted MFRS 3 and MFRS 10 on 1 January 2016.

(v) Ignore the tax effect of consolidation adjustments.

Required:
(a) Prepare the journal entries for eliminations and adjustments to arrive at the consolidated
accounts of Bijak Bhd.
(b) Prepare the following consolidated financial statement for Bijak Bhd and its subsidiaries
for the year 2018 :
(i) Consolidated Statement of Profit or Loss and Other Comprehensive Income,
(ii) Consolidated Statement of Financial Position,
(iii) Consolidated Statement of Changes in Equity (partial).

Solution:
(a) Consolidation journal entries
RM’000 RM’000
Dr Cr
(i) Dr Share capital (Pandai) 60
Cr Investment in Pandai 60
(to eliminate the 60% investment account)

(ii) Dr Share capital (Pandai) 20

Dr Beginning retained profit (Pandai) 20
Dr Goodwill on consolidation 10
Cr Investment in Pandai 50
(to eliminate the 20% investment account)
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(iii) Dr Capital reserve (group) 10

Cr Goodwill on consolidation 10
(to comply with MFRS 10- restatement of no
goodwill)

(iv) Dr Sales 100

Cr Cost of sales 100
(to eliminate inter-company sales)

(v) Dr Cost of sales (Bijak) 20

Cr Other assets 20
(to eliminate unrealised profit in stock)

(va) Dr Non-controlling interest (CSCI) 24

Cr Non-controlling interest (CBS) 24
(to record non-controlling interest in profit)

(vb) Dr Share capital (Pandai) 20

Dr Beginning retained profit (Pandai) 60
Cr Non-controlling interest (CBS) 80
(to record non-controlling interest in other equity)

(vi) Dr Investment in Cerdik 10

Cr Beginning retained profit (group) 10
(to record increase in previous investment)

(vii) Dr Share capital (Cerdik) - 60% x 100k 60

Dr Beginning retained profit (Cerdik) – 60% x 180k 108
Dr Goodwill on consolidation 42
Cr Investment in Cerdik 210
(to eliminate investment account)

(viii Dr Non-controlling interest (CSCI) – 40% x 80k 32

)
Cr Non-controlling interest (CBS) 32
(to record non-controlling interest in profit)

(ix) Dr Share capital (Cerdik) 40

Dr Beginning retained profit (Cerdik) 80
Cr Non-controlling interest (CBS) 120
(to record non-controlling interest)

Consolidation worksheet
Bijak Pandai Cerdik Adjustment Consolidate
Bhd Bhd Bhd d balances
RM’000 RM’000 RM’000 Dr Cr RM’000
Sales 500 600 400 100 iv 1,400
Cost of sales 200 250 150 20 v 100 iv 520
Gross profit 300 350 250 880
Operating 150 170 130 450
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expenses
Profit before tax 150 180 120 430
Tax expense 50 60 40 150
Profit after tax 100 120 80 280
NCI - - - 24 va
32 viii 56
Profit for s/h - - - 224
Beginning R/P 400 300 200 20 ii 10 vi
60 vb
108 vii
80 ix 642

Ending R/P 500 420 280 866

Goodwill - - - 10 ii 10 iii
42 vii 42
Investment in 110 - - 60 i
Pandai
50 ii -
Investment in 200 - - 10 vi 210 vii -
Cerdik
Other assets 990 800 700 20 v 2470
Share capital 500 100 100 60 i
20 ii
20 vb
60 vii
40 ix 500
Capital reserve - - - 10 iii 10
Retained profit 500 420 280 866
Current liabilities 300 280 320 900
NCI - - - 24 va
80 vb
32 viii
120 ix 256

(b) Consolidated financial statement

Bijak Bhd and its subsidiary

Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2018
RM’000
Sales 1,400
Less : cost of sales 520
Gross profit 880
Less : operating expenses 450
Profit before tax 430
Less : Tax 150
Profit after tax 280
Other comprehensive income -
Total comprehensive income 280

Profit attributable to:

Shareholders of the parent 224
Non-controlling interest 56
280
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Bijak Bhd and its subsidiary

Consolidated Statement of Financial Position
For the year ended 31 December 2018
RM’000
Goodwill on consolidation 42
Other assets 2,470
2,512

Share capital 500

Capital reserve (10)
Retained profit 866
Non-controlling interest 256
Current liabilities 900
2,512

Bijak Bhd and its subsidiary

Consolidated Statement of Changes in Equity (partial)
for the year ended 31 December 2018

RM’000
Capital reserve:
Beginning balance (10)
Changes during the year -
Ending balance (10)

Retained profits:
Beginning balance 642
Profit for the year 224
Ending balance 866
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