FINANCIAL ACCOUNTING AND REPORTING 4

About this Course

This is the fourth level course and it builds on knowledge and skills introduced in FAR510. The fourth stage, therefore, tests students¡¯ capabilities and competency in applying relevant MFRSs. It introduces the skills in consolidation by introducing simple group structures and business combinations. It also deals with related issues pertaining to operating segments and interim financial reporting of small medium entities (SMEs). This course also emphasizes the application of relevant financial reporting standards in preparation and presentation of financial statements.

Course Learning Outcomes

1) Apply knowledge on Malaysian Financial Reporting Standard (MFRS) framework for company and group financial reporting in Malaysia.
2) Assess the accounting data and relate to the Malaysian Financial Reporting Standard (MFRS) framework of company and group financial reporting in Malaysia.
3) Demonstrate communication skills in oral and in writing using relevant accounting standards for company and group financial reporting in Malaysia.

Course Syllabus

+ Course Syllabus

1) Accounting concept and principles in the conceptual framework.
MFRS 141 Agriculture:
- Objective
- Scope
- Definitions
- Recognition and measurement
- Gains and losses
- Inability to measure fair value reliably
- Government grant
- Disclosure

MFRS 6 Exploration for and Evaluation of Mineral Resources:
- Objective
- Scope
- Recognition of exploration and evaluation assets
- Temporary exemption from MFRS 108 paragraphs 11 and 12 6
- Measurement of exploration and evaluation assets
- Measurement at recognition
- Elements of cost of exploration and evaluation assets
- Measurement after recognition
- Changes in accounting policies
- Presentation
- Classification of exploration and evaluation assets
- Reclassification of exploration and evaluation assets
- Impairment
- Recognition and measurement
- Specifying the level at which exploration and evaluation
- assets are assessed for impairment
- Disclosure

Foreign currency translation
(to be covered in the project)



2) Impairment of Assets
MFRS 136 Impairment of Assets:
- Objective
- Scope
- Definitions
- Identifying an asset that may be impaired
- Measuring recoverable amount
- Measuring the recoverable amount of an intangible asset with
- an indefinite useful life
- Fair value less costs of disposal
- Value in use
- Recognising and measuring an impairment loss
- Cash-generating unit and goodwill
- Identifying the cash-generating unit to which an asset belongs
- Recoverable amount and carrying amount of a cash generating unit
- Goodwill
- Allocating goodwill to cash-generating units
- Timing of impairment tests
- Impairment loss for a cash-generating unit
- Reversing an impairment loss for an individual asset
- Reversing an impairment loss for a cash-generating unit
- Reversing an impairment loss for goodwill
- Disclosure
Reinforcing the concepts, principals and application of impairment in:
• Agriculture
• Plantation
• Exploration for and evaluation of mineral resources

3) Fair Value Measurement
MFRS 13 Fair Value Measurement:
- Objective
- Scope
- Measurement
- Definition of fair value
- The asset or liability
- The transaction
- Market participants
- The price
- Fair value at initial recognition
- Valuation techniques
- Inputs to valuation techniques
- Fair value hierarchy
- Disclosure

Current developments at IASB and MASB

Reinforcing the concepts, principals and application of fair value measurement in:

• Agriculture
• Plantation
• Exploration for and evaluation of mineral resources

4) Group accounts
Group accounts:
• Business Combination
Definition of amalgamation, absorption, acquisition
• Concept of reporting entity
• Recognising and measuring identifiable assets acquired and liabilities assumed
• Recognising and measuring goodwill or gain from a bargain purchase
• Current developments at IASB and MASB



CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CSOFP)
• Definition of holding and subsidiary companies
• Group structure – vertical and mixed groups
• Definition of control
• Exclusion and exemption from consolidation
• Regulatory framework for consolidation - in accordance with Financial Reporting Standards
• Preparation of Consolidated Statement of Financial Position (Use the schedule approach to compute goodwill, NCI and group retained profits).
• Pro-forma Accounts -T-account approach is NOT to be used in the teaching and learning.
• Treatment of goodwill and bargain purchase on consolidation
• Pre-acquisition reserve and post acquisition reserve
• Non Controlling Interest (NCI)
• Treatment of preference shares and debentures in the subsidiary
• Dividend (ordinary and preference) payable by the holding and subsidiary company out of post acquisition profit.
• Debenture interest payable by the holding and subsidiary company
• Adjustment for intra-group dividends out of post acquisition profits (ordinary and preference)
• Adjustment for intra-group debenture interest
• Adjustment for inter-company balances and transactions:- Loans, Current Accounts, Debtors and Creditors (items in transit), Bills Payable and Bills Receivables.
• Revaluation of non-current assets (depreciable and non-depreciable) of the subsidiary at the date of acquisition.
• Depreciation adjustment for revaluation of depreciable assets
• Adjustment for unrealized profit on intra-group sale of inventories
• Adjustment for unrealized profit on intra- group sale of non-current assets (depreciable and non-depreciable)
• Bonus shares issued by the holding company
• Bonus shares issued by the subsidiary (out of pre-acquisition reserve and post –acquisition reserve)

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CSOPL and OCI)
• Preparation of Consolidated Statement of Profit or Loss and Comprehensive Income for acquisition of the subsidiary in prior periods
• Preparation of Consolidated Statement of Profit or Loss and Comprehensive Income for acquisition of the subsidiary during the year
• Preparation of Statement of Changes in Equity (extract) showing the Group Retained Profit and Non Controlling Interest column
• Adjustment for:
o Intra-group dividends
o Intra-group debenture interest
o Intra-group sale of inventories
o Intra-group sale of non-current assets (depreciation adjustment)
o Unrealized profit due to intra-group sale of inventories (unrealized profit on the opening inventories and closing inventories)
o Unrealized profit on intra-group sale of non-current assets.
o Preference shares in the subsidiary

• Group Financial statement analysis and interpretation of financial ratios ( to be covered in the project)

5) Interim Financial Reporting
MFRS 134 Interim Financial Reporting
• Definition of interim financial reporting
• Explain content of an interim financial report
- minimum components of an interim financial report
- form and content of interim financial statements
- significant events and transactions
- other disclosures
- disclosure of compliance with MFRS
- periods for which interim financial statements are required to be presented
- materiality
• Explain the disclosure in annual financial statements
• Explain recognition and measurement
- same accounting policies as usual
- revenues received seasonally, cyclically or occasionally
- costs incurred unevenly during the financial year
- applying the recognition and measurement principles
- use of estimates
• restatement of previously reported interim period
• FRS for SMEs


6) Operating Segments
MFRS 8 Operating Segments
• Definition
• Reportable segments
- aggregation criteria
- quantitative thresholds
• Disclosure
- general information
- information about profit or loss, assets and liabilities
• Measurement
- reconciliation
- restatement of previously reported information
• Entity-wide disclosures
- information about products and services
- information about geographical areas
- information about major customers
• FRS for SMEs

Frequently Asked Questions

Q1 : Discuss the fair value measurement based on malaysian financial reporting standard.
A1 : Based on MFRS 13 Fair Value Measurement, it is divided into 3 level or hierarchy.

Q2 : What are the issues facing the agriculture?
A2 : The use a fair value approach in measuring all types of biological assets.

Q3 : What is actually consolidated financial statements discuss in the group accounts topic?
A3 : Consolidated financial statements is the financial statements of a GROUP in which the assets, liabilities, equity, income, expenses and cash flow of the parent and its subsidiaries are presented as those of a single economic entity.

Q4 : what is chief operating decision maker?
A4 : It identifies a function, that is to allocate resources to and assess the performance of the operating segment of an entity. It may not be a specific title, it can be a CEO, COO or maybe group of executive directors or others.