INCREASE IN SHAREHOLDINGS

What is a common reason why an investor might engage in piecemeal acquisitions of shares in an investee company over time?

• To immediately gain full control over the investee.

• To quickly liquidate the investee's assets.

• To avoid financial reporting requirements.

• To gradually increase influence or ownership without triggering regulatory thresholds.

When an investor aims to increase its controlling interest, what potential advantage does it seek to gain?

• To minimize the need for disclosure in financial statements.

• To decrease the need for accounting for investments.

• To achieve synergies and efficiencies in the combined entity's operations.

• To eliminate the need for financial due diligence.

Honey Bhd acquired 30% of 1,000,000 ordinary shares of Bee Bhd on 1 January 2022 at a consideration of RM800,000. Subsequently, another 500,000 ordinary shares was acquired on 1 January 2023 at a price of RM1,500,000. The fair value of net assets of Bee Bhd as at 1 January 2023 was RM2,500,000 an its fair value of ordinary share at the same date was RM2.50 per share. The policy of the group is to measure the non-controlling interest at fair value. Calculate the goodwill on consolidation or bargain purchase as at 1 January 2023.

• Goodwill RM50,000

• Goodwill RM250,000

• Bargain purchase RM250,000

• Bargain purchase RM50,000

MEE Bhd has acquired 60% ordinary shares of FIR Bhd on 1 January 2022. Subsequently, on 1 January 2023, they acquired another 20% ordinary shares of FIR Bhd at a consideration of RM8,900,000 when its fair value of net assets was RM40,560,000. Calculate the gain or loss on the subsequent acquisition of FIR Bhd.

• Gain of RM788,000

• Loss of RM788,000

• Gain of RM31,660

• Loss of RM31,660

Ray Bhd acquired 60% ordinary shares of Yay Bhd on 1 January 2022. Subsequently, on 1 January 2023 the company acquired another 30% ordinary shares of Yay Bhd. Which statement is TRUE regarding the transaction above?

• Ray Bhd gain control of Yay Bhd only after the subsequent acquisition which is on 1 January 2023

• The goodwill on consolidation is to be remeasured as at 1 January 2023

• The non-controlling interest will decrease as the controlling interest increase

• Yay Bhd become an associate of Ray Bhd on 1 January 2023.