Foreign subsidiaries financial statements are generally prepared in the local currency of the country it is operates in. Given the situation that a holding company is Malaysian and has a subsidiary in Indonesia, explain the following:
TWO (2) different methods of converting the Indonesian rupiah into Malaysian ringgit
The determining indicators in selecting the foreign currency conversion method for the Indonesian subsidiary. Explain any FIVE (5)
Renjatan Berhad is a palm oil manufacturing company based in Malaysia. It has 2 subsidiaries in Indonesia, an oil palm plantation company and also a palm oil manufacturing company. The oil palm plantation Hasil Bagus Pvt Ltd has been established 6 years ago and has been selling raw palm oil to both Renjatan and other local (Indonesian) manufacturers since its inception. Recently, Renjatan set up another subsidiary which is the palm oil Manufacturing company to cater for growing demand of manufactured palm oil. This palm oil manufacturing company, Sawit Kualitas Pvt Ltd buys all of its raw material from Hasil Bagus Pvt Ltd and exports all of its products to the parent company in Malaysia. The technology used by Sawit Kualitas was provided by Renjatan Berhad. Renjatan Berhad also provides the working capital and machinery used by Sawit Kualitas.
Using the conversion indicators as a guide to support your basis of argument, determine which method of foreign currency should be used to convert the financial results of Sawit Kualitas before consolidating its results with the parent company Renjatan Berhad.
The following are financial statements for Hanida Berhad and its foreign subsidiary Zala Pvt Ltd in Z country for year ended 31 December 2021:
Statements of Profit & Loss for year ended 31 December 2021
-) Cost of sales
-) Closing inventory
Statements of Financial Position as at 31 December 2021
Investment in Zala
Property, plant & equipment
Retained profit b/f
Retained profit for the year
Rates of exchange
1 January X7
Average rate for the year
31 December X7
Date closing inventory purchased
Date opening inventory purchased
1 January X4 – date PPE acquired
Calculate goodwill on consolidation. Determine NCI on acquisition date.
Translate Statement of Financial Position of Zala Pvt Ltd
Translate Statement of Profit & Loss of Zala Pvt Ltd
Determine the exchange difference in statement of financial position and statement of profit and loss
Prepare consolidated statement of profit and loss for year ended 31 December 2021
Prepare consolidated statement of financial position as at 31 December 2021
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