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    Tutorial 11 PDF

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    Tutorial 11 PDF

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    711 views9 pages

    Tutorial 11 PDF

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    tan keng qi

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    © All Rights Reserved
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    Tutorial 11

    Jane Lazar and Huang (4th Edition)-


    Chapter 38-MFRS 137
    Question 3
    page 773
    An entity is involved in a dispute with a competitor, who is
    alleging that the entity has infringed copyright and is seeking
    damages of RM15 million. The entity does not want to accrue or
    disclose the claim for compensation of RM15 million as it
    believes that disclosure will prejudice the outcome of the
    litigation.

    Required:
    Advise the entity.
    Question 4
    page 773
    Royan recently undertook a sales campaign whereby customers can obtain
    free gifts by presenting a coupon which has been included in an
    advertisement in the national newspaper on the purchase of specific
    electrical household appliances. The offer is valid for a limited time period
    from 1 January x6 until 31 July x6. Management is unsure as to how to treat
    this offer in the financial statements for the year ended 30 April x6.

    Required:
    Advise the management.
    Question 5
    page 773
    Wilder decided to close one of its overseas branches. A board meeting was
    held on 20 November x4 where a detailed formal plan was presented to the
    board. The plan was formalised and accepted at that meeting. Meetings were
    held by management to determine the issues involved in the closure.
    Subsequently, letters were sent to customers, suppliers and staff on 10
    December x4. the estimated cost of restructuring was RM10 million, including
    staff retraining of RM1 million. The company wished to provide for the
    restructuring cost in the financial statements for the year ended 31 December
    x4. The plan was implemented in February x5.
    Additionally, the operating lease on the present building is non-cancellable
    and runs for another three years. The annual rental is RM200,000, payable in
    advance and the lessor has offered to take a single payment of RM450,000 on
    1 January x6 to settle the outstanding amount owing and terminate the lease
    on that date. The lessor has agreed to allow Wilder to sub-let the building at a
    rental of RM120,000 per year, payable in advance on 1 January x5.

    Required:
    The company needs advise on how to treat the above under MFRS 137.
    Question 6
    page 774
    Ryan constructed an ecologically-efficient power station at a cost of RM1,000 million
    and began production on 1 January x4. Its economic life is 20 years. The power station
    has to be dismantled and the site restored to its original condition at the end of its
    economic life. Ryan estimated on 31 December x4 that the present value of the
    dismantling cost will be RM150 million (using a discount rate of 5%). Ninety-five
    percent of these costs relate to the removal of the power station and five percent
    relates to damage caused through generating energy.
    Ryan also purchased an oil company, XY during the year. As part of the sale agreement,
    oil has to be supplied to the companys former holding company at an uneconomic
    rate for five years. The loss estimated to be sustained over the five years is RM270
    million. At the same time, XY is exposed to environmental liabilities arising out of its
    past obligations mainly due to soil erosion though currently there is no legal obligation
    to carry out any restoration work. Ryan has a reputation for ensuring the preservation
    of the environment and has estimated and decided to provide for RM100 million in
    respect of the environmental liability.

    Required:
    Advise the directors on the accounting treatment of the various costs that have been
    incurred and/or will be incurred.
    0.05 x 136m

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