INVESTMENT IN ASSOCIATES & JOINT ARRANGEMENTS

What is the primary accounting method for investments in associates and joint venture?

• Cost method

• Fair value method

• Equity method

• Consolidation method

When using the equity method for investments in associates, how are dividends received from the associate recorded?

• As an increase in the investment's carrying amount

• As a reduction in the associate's share of profits

• As an asset to the investment in associates

• As an expense in the carrying amount

On 1 January 2022, AM Bhd acquired 30% ordinary shares (issued at RM1 each) of KL Bhd at a cost of RM54 million. On that date the retained profit of KL Bhd was RM126 million. The retained profit of KL Bhd at 31 December 2022 was RM158 million. At the end of the year, the impairment loss of goodwill of KL Bhd was RM5 million.

• RM81 million

• RM58.6 million

• RM63.6 million

• RM96.4 million

In a joint arrangement, what is the primary feature that distinguishes it from other types of business structures?

• Shared profits and losses

• Independent financial statements

• Sole ownership

• Shared control and decision-making

Orchid Bhd acquired 2 million ordinary shares of Lily Bhd. The number of issued

ordinary shares of Lily Bhd is 6 million shares. Orchid Bhd has the ability to appoint

two directors out of five directors in Lily Bhd. Identify the relationship between Orchid Bhd and Lily Bhd.

• Parent and subsidiary

• Joint arrangements

• Associates

• Joint venture

Harry Bhd, Omega Bhd, Toren Bhd decided to form a company known as Cool Bhd.

Harry Bhd, Omega Bhd, and Toren Bhd hold 25%,35% and 40% respectively of the

voting power in Cool Bhd. The contractual agreement among the investors is that at

least 90% of the voting right were required to execute decisions about relevant

activities of Cool Bhd. Which statement is TRUE regarding the above situation?

• Cool Bhd is an associate of Toren Bhd

• Harry Bhd and Omega Bhd have joint control over Cool Bhd. Toren Bhd is just a party to the arrangement.

• Harry Bhd, Omega Bhd and Toren Bhd have joint control over Cool Bhd.

• Cool Bhd is a subsidiary of Omega Bhd and Toren Bhd.

Company A and Company B have entered into a joint arrangement to explore and extract oil from a specific oilfield. Both companies share the control and decision-making in the arrangement. The arrangement also stated that all rights to the assets and obligations of the liability are to be shared equally. What type of joint arrangement is this?

• Joint operation

• Joint venture

• Joint control

• Joint associates