# STUDY GUIDE

Topics: Balance sheet, Bond, Pension Pages: 13 (3617 words) Published: April 26, 2015
﻿Topic 4
MFRS 136 IMPAIRMENT OF ASSETS

Topic Review Questions

Question 1
The following information relates to three assets:

A
RM000
B
RM000
C
RM000
Carrying value
Net realisable value
Value in use
100
110
120
150
125
130
120
100
90

Required:
1. What is the recoverable amount of each asset?
2. Calculate the impairment loss for each of the three assets.

Question 2
Explain the reasoning behind the definition of recoverable amount contained within MFRS136:

Question 3
An entity owns a property which was originally purchased for RM300,000. The property has been re-valued to RM500,000 with the revaluation of RM200,000 being recognised as other comprehensive income and recorded in the revaluation reserve. The property has a current carrying value of RM460,000 but the recoverable amount of the property has just been estimated at only RM200,000.

Required:
What is the amount of impairment and how should this be treated in the financial statements?

Tutorial Question 4
A company runs a unit that suffers a massive drop in income due to the failure of its technology on 1 January 20X8. The following carrying values were recorded in the books immediately prior to the impairment:

Goodwill
Technology
Brands
Land
Buildings
Other net assets
RM’million
20
5
10
50
30
40
The recoverable value of the unit is estimated at RM85 million. The technology is worthless, following its complete failure. The other net assets include inventory, receivables and payables. It is considered that the book value of other net assets is a reasonable representation of its net realisable value.

Required:
Show the impact of the impairment on 1 January.
Topic 5
Topic Review Questions

Question 1
Butler Berhad has a year end of 31 December. On 27 November 2012, Butler Berhad buys goods from a Swedish supplier for SwK 324,000. On 19 December 2012, Butler Berhad pays the Swedish supplier in full.

Exchange rates:
27 November 2012 RM1 = SwK 11.15
19 December 2012RM1 = SwK 10.93

Required: Show the accounting entries for these transactions.

Question 2
Functional currency is the currency a company will use in its day to day transactions. Using the factors specified in MFRS 121, determine the functional currencies of Company A, B and C: Company A operates in Malaysia. It sells goods throughout Malaysia and Asia with all transactions denominated in RM. Cash is received from sales in RM. It raises finance locally from Malaysian banks with all loans denominated in RM. Company A has subsidiaries Company B and Company C located in Asia. Company B operates as an independent operation, generating income and expenses in its local currency and raising finance in its local currency. Company C only sells goods imported from Company A and remits all profits back to Company A. Question 3

Star Berhad is a newly established company whose financial statements are denominated in \$ as a functional currency. Translate the financial statements into the presentation currency, which is RM. The exchange rates are as follows:

01.01.11RM1 = \$1.20
AverageRM1 = \$1.50
31.12.11RM1 = \$2.00

Question 4
Explain the treatment of foreign currency transactions:
Non-current assets
A company purchases equipment for its own use from a foreign supplier for €90,000 when RM1 = €1.80. On the reporting date, the exchange rate is RM1 = €1.50. The company uses straight line depreciation with a useful life of 5 years. Receivables

A Malaysian based company sells goods to a German company for €48,000 on 5th May when the rate of exchange was \$1 = €3.20. The customer remits €48,000 two months later on 5th July when the rate of exchange is \$1 = €3.17. Using the question above, show the journal entries if the company prepares accounts at 30th June when the rate of exchange was \$1 = €3.15.

Payables
A company preparing accounts in dollars buys goods from a Spanish supplier...