EXERCISE ON CSOPL

VERTICAL STRUCTURE

The statements of profit or loss and statements of changes in equity of Eficaz Bhd, Eficiente Bhd
and Agudo Bhd for the year ended 31 December 2018 are as follows:

Statements of Profit or Loss for the year ended 31 December 2018

Eficaz Bhd Eficiente Bhd Agudo Bhd

RM million RM million RM million
Revenue 120 80 45
Cost of sales (50) (40) (15)
Gross profit 70 40 30
Operating expenses (25) (20) (10)
Gain on disposal of assets - 1 -
Management and
consultancy fees 15 - -
Investment Income 10 5 2
Profit before tax 70 26 22
Taxation (15) (5) (4)
Profit for the year 55 21 18

Eficaz Bhd Eficiente Bhd Agudo Bhd

RM million RM million RM million
Retained profit b/f 120 65 59
Profit for the year 55 21 18
Ordinary dividend paid (10) (5) (6)
Retained profit c/f 165 81 71

Additional information:

1. On 1 January 2015, Eficaz Bhd acquired 60% of the issued ordinary shares in Eficiente
Bhd for RM140 million The retained profit of Eficiente Bhd on that date was RM8 million
and there were no other reserves. The fair value of the non-controlling interest on 1
January 2015 was RM6 million.

On that date, the fair value of the plant of Eficiente Bhd was RM12 million and its carrying
value was RM10 million. The remaining economic life of the plant was 8 years. Eficiente
Bhd did not incorporate the fair value in its accounts. Depreciation is charged as an
operating expense.

2. On 1 July 2018, Eficiente Bhd acquired 75% of the issued ordinary shares of Agudo Bhd
for a cash consideration of RM5 million. The bargain purchase arising from the acquisition
was RM2.5 million.

The non-controlling interest in Agudo Bhd attributable to Eficiente Bhd has a fair value of
RM8.5 million on the date of acquisition.
3. In September 2018, Eficiente Bhd sold goods to Eficaz Bhd for RM10 million of which RM2
million remained in the inventory of Eficaz Bhd as at 31 December 2018. Eficiente Bhd
made a profit of RM3 million on these sales.

4. Eficiente Bhd sold an equipment to Eficaz Bhd in October 2018 at a profit of RM1 million.
The remaining useful life of the equipment was 4 years.

5. Management and consultancy fees derived by Eficaz Bhd were all from Eficiente Bhd.
These expenses were included in the operating expenses of Eficiente Bhd.

6. Investment in Eficiente Bhd was tested for impairment as at 31 December 2018 and it was
to be impaired by RM200,000.

7. All entities have paid their dividends in December 2018. Eficaz Bhd and Eficiente Bhd had
received all their shares of dividends from their investee companies.

8. All profits and losses are deemed to accrue evenly throughout the year.

9. The group’s policy is to value the non-controlling interests at fair value at the acquisition
date.

Required:

a. Prepare the Consolidated Statement of Profit or Loss of Eficaz Bhd Group for the year
ended 31 December 2018.

b. Prepare the Consolidated Statement of Changes in Equity (extract) for the year ended 31
December 2018, showing group retained profit and non-controlling interest.