Problem
On 1 July 2015 Hyundai Bhd acquired 300,000 out of the 500,000 issued ordinary shares of Scoda Bhd at a total cost of RM500,000. At that date, the accumulated profits of Scoda Bhd of RM100,000.
On 1 July 2015 Hyundai Bhd also acquired 120,000 out of 400,000 issued ordinary shares of Sigma Bhd when the accumulated profits of Sigma Bhd was RM60,000 and revaluation reserve was RM100,000. The consideration was settled by a share exchange of two new shares in Hyundai Bhd for every three shares acquired in Sigma Bhd and a cash payment of RM200,000. On that date of issue, the market value of ordinary shares of Hyundai Bhd and Sigma Bhd was RM2.00 and RM1.50 respectively.
Following the current period, Hyundai Bhd sold goods to Sigma Bhd at cost plus 25% of RM50,000 of these goods remained in Sigma Bhd's books.
On 30 June 2016 the accumulated profits and revaluation reserve of Sigma Bhd showed a balance of RM120,000 and RM150,000 respectively.
Required:
• Explain how Hyundai Bhd will account for its investment in Scoda Bhd and Sigma Bhd on the Consolidated Statement of Financial Position.
• Calculate the carrying value of Hyundai Bhd's investment in Sigma Bhd that should be disclosed in the group financial statement as at 30 June 2016.
• Should there be a difference to your answer in (a) and (b) above if Hyundai Bhd had the power to appoint 7 out of 10 directors to the Board of Directors of Sigma Bhd? Explain.