BKAF3073 SEM A152

TUTORIAL FOR TOPIC 7 Foreign Operations

SUBMISSION DATE: 19 May 2016

Question 1 AMA & IQAL

Part A, AMA Bhd
AMA Bhd was established in Malaysia in 2010 and its functional currency is the Malaysian
Ringgit. The following foreign currency transactions occurred during the year 2012:
23 March 2012

Purchased inventory from a Vietnamese manufacturer at an invoice

cost of VND500,000,000. On this date, the exchange rate was
RM1.00 = VND6,700.

28 May 2012

Sold goods to an Indonesian customer. The invoice was

IDR240,000,000. The exchange rate was RM1.00 = IDR3,200.

16 July 2012

Paid the amount due to the Vietnamese manufacturer. The

exchange rate was RM1.00 = VND6,800.

6 October 2012

Sold merchandise on credit to a customer in Singapore. The billing

price was SGD85,000 and the exchange rate was SGD1.00 =
RM2.35.

25 November 2012

Received full settlement amount from the Indonesian customer.

The exchange rate was RM1.00 = IDR3,180.

AMA Bhds financial year ends on 31 December each year. The exchange rates as at 31
December 2012 were RM2.41 to SGD1.00, RM1.00 to VND6,780 and RM1.00 to IDR3,150.

REQUIRED: (Round off your answer to the nearest Ringgit)

(a)

Prepare the journal entries to record the above transactions.

(b)

Prepare the journal entries to record gain or loss at the end of the reporting date.

Part B, IQAL Bhd

IQAL Bhd is a Malaysian company and on 1 January 2012 it acquired a 100% interest in the
equity capital of TRUST Inc, which is a Thai company for THB1,500,000. On this date, the
retained profits of TRUST Inc were THB4,500,000. The exchange rate was RM1.00 to
THB9.80. The statement of financial position of TRUST Inc as at 31 December 2012 was as
follows:
TRUST Inc
Statement of Financial Position
As at 31 December 2012
Non-current assets
Current assets
Total assets

THB
4,500,000
6,460,000
10,960,000

Share capital of THB1 each

Retained profits
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities

2,000,000
5,480,000
7,480,000
1,620,000
1,860,000
10,960,000

The exchange rate on 31 December 2012 was RM1.00 to THB9.60 and the average exchange
rate for 2012 was RM1.00 to THB9.50.

REQUIRED: (Round off your answer to the nearest Ringgit)

Translate the statement of financial position of TRUST Inc as at 31 December 2012 to the
Malaysian Ringgit.

Question 2 Melewar & Talam

Part A, Melewar Bhd
Melewar Bhd was established in Malaysia in 2005 and its functional currency is the Malaysian
Ringgit. The following foreign currency transactions occurred during the year 2010:
15 November 2010

Purchased merchandise from a Glasgow, Scotland

manufacturer at an invoice cost of 20,000. On this date, the
exchange rate was RM4.30 to 1.00.

3 December 2010

Purchased merchandise from a Sydney, Australia

manufacturer. The invoice was AUS$10,000. The exchange
rate was RM2.90 to AUS$1.00.

10 December 2010

Sold merchandise on credit to a customer in Singapore. The

billing price was S$30,000 and the exchange rate was RM2.30
to S$1.00.

14 December 2010

Paid the amount due to the Glasgow, Scotland manufacturer.

The exchange rate was RM4.50 to 1.00.

Melewar Bhds financial year ends on 31 December. The exchange rates as at 31 December 2010
were RM4.60 to 1.00, RM2.70 to AUS$1.00 and RM2.20 to S$1.00.

REQUIRED:
a) Prepare the journal entries to record the above transactions.
b) Prepare the journal entries to record gain or loss at the end of reporting date.

Part B, Talam Bhd

Talam Bhd is a Malaysian company and on 1 January 2009 it acquired a 100% interest in the
equity capital of Royal Sport Plc, which is a British company for 300,000. On this date, the
retained profits of Royal Sport Plc were 200,000. The exchange rate was RM5.30 to 1.00. The
statement of financial position of Royal Sport Plc as at 31 December 2009 was as follow:
Royal Sport Plc
Statement of Financial Position
As at 31 December 2009
Property, plant and equipment
Cash
Accounts receivable
Inventories
Total assets

250,000
90,000
30,000
160,000
530,000

Share capital of 1 each

Retained profits
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities

100,000
240,000
340,000
110,000
80,000
530,000

The exchange rate on 31 December 2009 was RM5.60 to 1.00 and the average exchange rate
for 2009 was RM5.45 to 1.00.

REQUIRED:
Translate the statement of financial position of Royal Sport Plc as at 31 December 2009 to the
Malaysian Ringgit.

Question 3 Wau & Pelangi

Part A, Wau Berhad
Wau Bhd was established in Malaysia in 2004 and its functional currency is the Malaysian
Ringgit. The following foreign currency transactions occurred during the year 2014:
11 April 2014

Purchased goods on credit from a US manufacturer at an

invoice cost of US$80,000. On this date, the exchange rate
was RM4.00 to US$1.00.

18 May 2014

Sold merchandise to an Australian manufacturer. The invoice

was paid cash AUS$30,000. The exchange rate was RM3.00
to AUS$1.00.

19 July 2014

Buy machinery for AUS$100,000. Half of the invoice price

was paid cash. The exchange rate was RM2.70 to AUS$1.00.

6 October 2014

Paid the amount due to the US manufacturer. The exchange

rate was RM4.50 to US$1.00.

Wau Bhds financial year ends on 31 December. The exchange rates as at 31 December 2014
were RM4.80 to US$1.00 and RM2.90 to AUS$1.00
REQUIRED:
(a)

Prepare the journal entries to record the above transactions.

(b)

Prepare the journal entries to record gain or loss at the end of reporting date.

Part B, Pelangi Berhad

On 1 July 2013 Pelangi Bhd acquired a 100% interest in the equity capital of an Argentinian
incorporated company, Maradoni Ltd for a cash consideration of $ARG20 million. The retained
earnings and revaluation reserve on the date was $ARG10 million and $ARG2 million
respectively. The statement of financial position of Maradoni Ltd as at 30 June 2014 is as
follows:
Maradoni Ltd
Statement of Financial Position
As at 30 June 2014
$ARG000
Non-current assets
21,000
Current assets
12,000
33,000
Total assets
Share capital
Revaluation reserve
Retained profits
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities

10,000
2,000
15,000
27,000
5,000
1,000
33,000

The relevant exchange rates between Malaysian Ringgit (MYR) and Argentine Peso ($ARG)
were as follows:
1-Jul-13
RM1 = $ARG2.8500
30-Jun-13
RM1 = $ARG2.8501
Average from 1-July-13 to 30-Jun-14
RM1 = $ARG3.0000
1-Jan-14
RM1 = $ARG2.1850
30-Jun-14
RM1 = $ARG3.1510
REQUIRED:
(a) Translate the statement of financial position of Maradoni Ltd as at 30 June 2014 to the
Malaysian Ringgit in accordance with MFRS 121 The Effects of Changes in Foreign
Exchange Rates. (Round up your answer to the nearest Ringgit).
(b) Provide calculation of the proof of translation difference obtained in part (a) (Round up
your answer to the nearest Ringgit).

Question 4, White Land

On 10 April 2012, White Land Bhd acquired 100% interests in LEAN Limited, a company
incorporated in South Africa. The presentation currency of the subsidiary is South African Rand
(ZAR$). On the date of acquisition, LEAN Limiteds net assets were represented by share capital
of ZAR$20 million and retained earnings of ZAR$2 million.
The financial statements of LEAN Limited for the year 2015 are as follows:
LEAN Limited
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2015
ZAR $'000
Sales
200,000
Cost of sales
(60,000)
Gross profit
140,000
Operating expenses
(80,000)
Profit before tax
60,000
Tax
(15,000)
Profit after tax
45,000

LEAN Limited
Statement of Financial Positions
As at 30 June 2015
Property, plant and equipment (net book value)
Intangibles
Current assets:
Account receivables
Bank
Total assets
Share capital
Retained earnings
Total equities
Long-term loans
Current liabilities
Total equities and liabilities

ZAR $'000
55,000
16,000
19,000
35,000
125,000
20,000
55,000
75,000
30,000
20,000
125,000

Additional information:
1.
2.
3.
4.

No revaluation or impairment recognised in the current year.

Property, plant and equipment are depreciated on a straight line basis.
In the translated statement of financial position of LEAN Limited for the year ended 30
June 2014, the translation reserve balance was RM4,960,000 (debit).
The relevant exchange rates between ZAR$ and Ringgit Malaysia (RM) were as follows:
Date
10 April 2012
30 June 2014
31 December 2014
30 June 2015
27 October 2015
31 December 2015
Average 1 July 2014 to 30 June 2015

ZAR$1 to RM
0.3800
0.4250
0.3600
0.3100
0.3200
0.3300
0.4000

REQUIRED:
In accordance with MFRS 121 The Effects of Changes in Foreign Exchange Rates:
(a)

Prepare the Statement of Profit or Losses and Other Comprehensive Income for the year
ended 30 June 2015.

(b)

Prepare the Statement of Financial Position as at 30 June 2015.

Question 5, Malaysia Steel Berhad

On 1 January 2012, Malaysia Steel Bhd acquired 80% interest in Billet Ltd, a company
incorporated in Thailand. On this date, the net assets of Billet Ltd were represented by ordinary
share of THB20 million, share premium of THB1 million, revaluation reserves of THB800,000
and retained profits of THB5.5 million. The company is principally involved in the
manufacturing of bar steels and billets products. The official currency of Thailand is the Thai
BAHT. Financial statements of Billet Ltd for the year ended 31 March 2014 are as follows:
Statement of Profit or Loss and Other Comprehensive Income
for the financial year ended 31 March 2014
Thai BAHT
Thai BAHT
(THB000)
(THB000)
Revenue
40,000
Cost of sales
13,000
Gross profit
27,000
Other operating income
5,800
Administrative expenses
11,180
Distribution costs
13,330
(24,510)
Operating profit
8,290
Finance costs
(2,500)
Profit before taxation
5,790
Tax expense
(1,447)
Profit for the financial year
4,343
Beginning retained profits
8,750
Ending retained profits
13,093

Statement of Financial Position As At 31 March 2014

Thai BAHT
Thai BAHT
(THB000)
(THB000)
Assets
Property, plant and equipment
Land held for property development
Investment in associated companies
Other Investments
Total non-current assets
Inventories
Trade and other receivables
Derivative financial assets
Cash and bank balances
Total current assets
Total assets

15,260
15,390
3,000
1,570

35,220

2,121
4,272
1,200
818
8,411
43,631

Equity
Ordinary share
Share premium
Revaluation reserves
Retained profits
Total equity

20,000
1,000
5,410
13,093
39,503

Non-current liabilities
Current liabilities
Total liabilities
Total equity and liabilities

3,000
1,128
4,128
43,631

Additional information:
1.
Land held for property development was acquired on 21 July 2008 at the price of THB9.98
million. Since the purchase, Billet Ltd had revalued the land twice. The first revaluation
was undertaken on 11 September 2009 and the second revaluation was carried out on 30
November 2013.
3.
The revaluation reserves accounts deal solely with the revaluation of land.
4.
All the property, plant and equipment are depreciated using a straight line method, with
depreciation rates ranging from 5% to 20% according to the specific non-current assets.
5.
The relevant exchange rates between Thai BAHT and Malaysian Ringgit (MYR) were as
follows:
21 July 2008
THB1 = RM0.1033
11 September 2009
THB1 = RM0.1003
1 January 2012
THB1 = RM0.0995
30 November 2013
THB1 = RM0.0990
Average for the financial year ended 31 March 2013
THB1 = RM0.0950
Average for the financial year ended 31 March 2014
THB1 = RM0.0996
31 March 2013
THB1 = RM0.0947
31 March 2014
THB1 = RM0.0997

REQUIRED:
Translate both the Statement of Profit and Loss and Other Comprehensive Income and the
Statement of Financial Position as at 31 March 2014 in accordance with MFRS 121 The Effects
of Changes in Foreign Exchange Rates. (Round up your answer to the nearest Ringgit).

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Question 6, Alliance Bhd

On 1 May 2010, Alliance Bhd, a company incorporated in Malaysia, acquired 100% interests in
Henley Ltd, a company incorporated in a foreign country. The presentation currency of the
subsidiary is AD$. On the date of acquisition, Henley Ltd net assets were represented by share
capital of AD$10 million, revaluation reserve of AD$1 million and retained earnings of AD$1
million.
The financial statements of Henley Ltd for the year 2012 are as follows:
Henley Ltd
Statement of Comprehensive Income
For the year ended 31 December 2012
Sales
Cost of sales
Gross profit
Operating expenses
Profit before taxation
Taxation
Profit after taxation
Other comprehensive income:
Revaluation surplus
Total comprehensive income

AD$'000
10,000
(5,500)
4,500
(2,500)
2,000
(600)
1,400
2,500
3,900

Henley Ltd
Statement of Changes in Equity (partial)
For the year ended 31 December 2012
Beginning retained profit
Profit for the year

AD$'000
3,600
1,400

Ending retained profit

5,000

Beginning revaluation reserve

Revaluation surplus for the year

1,000
2,500

Ending revaluation reserve

3,500

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Henley Ltd
Statement of Financial Positions
As at 31 December 2012
AD$'000
Non-current assets:
Intangible asset
Land
Equipment
Accumulated depreciation

500
10,000
5,000
(1,000)

Current assets:
Inventory
Account receivables
Cash
Total assets

4,000
3,000
1,000
22,500

Owners Equity:
Share capital
Revaluation reserves
Retained profit
Total equities

10,000
3,500
5,000
18,500

Non-current liabilities
Long-term loans
Current liabilities:
Account payables
Taxation liabilities
Total equities and liabilities

2,000

1,400
600
22,500

Additional information:
5.

The intangible asset, a wide-spectrum license was acquired on 15 May 2011, for AD$1
million. It is amortised over four years on a straight line basis with a full years
amortisation charge for the year 2011.

6.

Land was acquired in January 2006 for AD$6.5 million. Henley Ltd revalued the land on
31 December 2008 and 30 November 2012.

7.

The equipment is depreciated on a straight line basis over 10 years with no salvage value.

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8.

In the 31 December 2011 translated statement of financial position of Henley Bhd, the
translation reserve balance was RM200,000 (credit).

9.

The relevant exchange rates between AD$ and Ringgit Malaysia were as follows:
1 May 2010
AD$1.00 = RM0.74
15 May 2011
AD$1.00 = RM0.78
31 December 2011
AD$1.00 = RM0.70
30 November 2012
AD$1.00 = RM 0.60
31 December 2012
AD$1.00 = RM0.60
Average October December 2012 AD$1.00 = RM0.62
Average for 2012
AD$1.00 = RM0.65

REQUIRED:
Prepare a set of translated financial statements of Henley Ltd in accordance to MFRS 121 The
Effects of Changes in Foreign Exchange Rates that includes:
(a) Statement of Comprehensive Income for the year ended 31 December 2012
(b) Statement of Financial Position as at 31 December 2012

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