Matriculation No: Identity Card No.: Telephone No.: E-Mail: Learning Centre
Matriculation No: Identity Card No.: Telephone No.: E-Mail: Learning Centre
Matriculation No: Identity Card No.: Telephone No.: E-Mail: Learning Centre
< BACHELOR ACCOUNTING>
< SEPT 2020>
MATRICULATION NO : <960828016204001>
E-MAIL : <[email protected]>
Content
Pages
Assignment 1
3.0 Summary…… …………………………………. 6
Assignment 2
3.0 Summary…… …………………………………. 12
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Assignment 1
1.0 MFRS 141 Agriculture was issued by the Malaysian Accounting Standards Boars
assets in the financial statement in accordance to (MASB), the Companies Act 1965,
the Securities Commission’s guidelines and the Bursa Malaysia’s listing requirements
(Tan,2010). MFRS 141 now requires biological assets and agriculture produce too be
measured at fair value through profit and loss. The presentation or disclosure of the
biological assets basically will appear in the Statement of Financial Position and in the
from the changes in fair values is usually shown in the statement of Profit or Loss and
other Comprehensive Income. According to PwC (2009), as the changes in the fair
present the change in fair value after revenues and other income, but before expenses.
The presentation should take into consideration the unique characteristics of the
production of the entity. Usually, gain or loss arising from the changes in fair value
occurs when there is a price difference between current market price and previous
market price. The reason why there are changes in prices for biological assets is
because of age factor (livestock) and high demand from customers (plantation). The
disclosure information published with the financial position, an entity shall disclose
the existence and carrying amounts of biological assets whose title is restricted, and
the carrying amounts of biological assets pledged as security for liabilities, the amount
estimates of the physical quantities of each group of the entity’s biological assets at
the end of the period and output of agricultural produce during the period. An entity
between the beginning and the end of the current period. The reconciliation shall
include, the increase due to purchase, decreases attributable to sales and biological
assets classified as held for sale ( or included in a disposal group that is classified as
held for sale), decreases due to harvest, increases resulting from business
operation into the presentation currency of the reporting entity and other changes.
2.0 2020 is a challenging year for most of the plantation companies in the Malaysia due to
the outbreak of COVID-19 pandemic. This outbreak gives negative effects on the
country’s economy from global supply and demand shocks and also domestic factors
during the lockdown. For example, Malaysian palm oil affected by the outbreak of the
coronavirus. Slow demand from the palm oil importing countries as well as domestic
consumption. Also, the movement control order has interrupted the normal upstream
activities such as fertilizing, harvesting, collection of FFB and milling. This has
resulted in a lack of manpower and logistic issues thus will hamper the palm oil
and mills in six districts until April 14 after some of the workers have tested positive
for COVID-19. With the appeals from MPIC, MPOA and plantation companies the
closure was lifted on the 8 April. The brief shutdown of the estates and mills has
affected nearly 75% of Sabah’s CPO production and about 100,000 workers. Sabah
Holdings has voluntarily ceased its operation within the Sahabat region in Hahad
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Datu, Sabah after 11 COVID-19 cases were detected. The closure involves 115,432
palm oil production will likely to have slow growth in 2020 compared to 2019. The is
based on the impact of the low fertilizer application in 2019, dry weather in the middle
of 2019 which resulting in diminished oil palm fruit yields and also brief suspension
of Sabah oil palm estates and mills due to COVID-19 pandemic. Palm oil ending
stock is one of the important variables that influence the CPO price movement.
Fundamentally, the low stock will result in a higher CPO price and vice versa. It is
forecasted that Malaysian palm oil stock to be at 1.9 million tonnes by the end of 2020
compared to 2 million tonnes in 2019. This might be because of slow demand from
the importing countries due to COVID-19 outbreak and also postponement of B20
biodiesel mandate. For the period January to March Malaysian palm oil export record
decline by 25% to 3.48 million MT compared to the same period 2019. The decline
was mainly contributed by low import from major importing countries such as India,
China and EU. However, other important countries for MPO such as South Korea,
USA, Philippines and Japan showed an increment in their imports. Ii shows that for
the first quarter of 2020, the COVID-19 pandemic issue was yet affected the
July 2020 to 41,801 tonnes as compared to 33,531 tonnes in the previous month.
Comparison year on year showed a decrease of 30.4% as compared to the same month
in the previous year. Exports of Malaysia’s natural rubber amounted 45,385 tonnes in
July 2020, an increase of 17.8% against 38,587 tonnes in June 2020. People’s
Republic of China remains as the main destination for natural rubber exports, with a
share of 58.9% of total exports in July 2020 followed Germany (6.0%), Finland
(5.1%), Iran (3.9%) and Taiwan (3.0%). Rubber gloves was the main export item with
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export value increasing by 14.0% from RM2.78 billion in June 2020 to RM3.17
billion in July 2020. Total domestic consumption for natural rubber was 46,844
tonnes, increased by 5.8%. Rubber gloves companies dominates the use of natural
rubber with 36,024 tonnes or 76.9% from the total domestic consumption.
Malaysia are required to disclose their accounting for biological assets in the annual
report. Disclosing the items that are required by the standard is very important for the
companies in order to provide quality annual reports. Thus, the prepares of the annual
reports should be aware of any changes in the accounting standard. Furthermore, the
economic development. However, there are numerous issues and challenges faced by
the sectors, including labour shortage; acreage limitation; import restriction; high
measures to boost production and expand the market for plantation. These include
complying with international standards. These measures are expected to enhance the
the companies.
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References
Kuok Ho, Daniel Tang & Qahtani, Hamas. (2019). Sustainability of oil palm plantations in
Ismail, A., Ahmad, S.M., & Sharudin, Z. (2015). Labour Productivity in The Malaysian Oil
Palm Plantation Sector. Oil Palm Industry Economic Journal, 15(2), 1-10.
Kushairi, A., Ong-Abullah, M., Nambiappan, B., Hishamuddin, E., Bidin, M.N.I.Z., Ghazali,
R., Subramaniam, V., Sundram, S, Parveez G.K.A 2019. Oil Palm economic performance in
Assignment 2
1.0 As a globally integrated plantation company, Sime Darby Plantation which corporate
office located at Main Block, 3, Plantation Tower No.2, Jalan PJU 1A/7 Ara Damansara
47301 Petaling Jaya, Selangor is involved in the full spectrum of the palm oil value chain,
from upstream to downstream activities, R&D, renewables and agribusiness. Sime Darby
Plantation also involved in rubber and sugarcane plantations as well as cattle rearing. The
company’s total land bank approximately 1 million hectares which over 600,000 ha
planted with oil palm, over 11,000 ha planted with rubber, over 5,000 ha planted with
sugar cane and 9,000 ha used as grazing pastures. Sime Darby Plantation is the world’s
largest oil palm plantation company by planted area, accounting for about 4% of total
cultivating and managing oil palm, rubber and sugarcane plantation estates; Milling of
FFB into CPO and PK, processing and sales of rubber and sugarcane and cattle rearing
and beef production. In upstream, Sime Darby Plantation operate and manage 241
plantation estates and 71 palm oil mills located in Malaysia, Indonesia, PNG and the
Soloman Islands. Activities involve (Downstream) Crushing of PK into CPKO and PKE;
Production and sales of bulk and refined oils and fats (which includes specialty and end-
user oils and fats; Production and sales of nutraceutical products which includes
Thailand, Vietnam, Japan, China, Germany, United Kingdom, South Africa, Netherlands,
United States of America, Papua New Guinea and Solomon Islands. Other activities
including agricultural products and services, production and sales of oil palm seeds and
seedlings, research and breeding programmes of oil palm and rubber with special focus
technology and renewable energy which includes bio-based chemicals, biogas and
composting.
Financial Year 2016 FY 30Jun 2017 FY 30Jun 2018 FP 31Dec2018 FY 31Dec 2019
Six-month FP
Revenue 11,945,994 14,767,93 14,335,826 6,518,321 12,062.266
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EBITDA 2,394,776 6,073,863 3,872,983 1,213,295 1,611,899
Profit before 1,275,604 4,848,815 2,736,749 614,687 405,886
interest and tax
Profit before tax 855,274 4,424,443 2,577,722 513,175 251,316
Profit after tax 1,019,170 3,945,390 2,086175 367,923 274,885
Perpetual sukuk - 2,724 124,300 62,661 124,300
Non-controlling 35,756 42,087 33,624 5,626 28,952
interest
Operating margin% 10.8 32.9 19.2 9.4 3.4
Return on 10.1 28.2 12.6 3.7 (1.5)
shareholders’
equity%
Debt/Equity% 55.0 51.2 39.8 46.3 48.8
Debt/EBITDA(x) 2.3 1.4 1.8 6.0 4.8
Basic earnings per 14.4 52.2 25.5 3.6 (2.9)
share (sen)
Net asset per share 1.4 1.8 2.0 1.9 1.9
(rm)
Net dividend per 116.7 150.0 17.5 1.7 1.0
share (sen)
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2.0 The evaluation of MFRS1 141 conformity in the Sime Darby Plantation financial
statement for the year ended 2019. Oil palm represents the fresh fruit (“FFB”) of up to 2
weeks prior to harvest for use in the Group’s and the Company’s palm product operations.
During the financial year, the Group and the Company harvested approximately 9,579,000
metric tonnes (“MT”) of FFB (2018: 5,576,000 MT) and 3,610,557 MT of FFB (2018:
1,995,000 MT) respectively. The quantity of unharvested FFB of the Group and of the
Company as at 31 December 2019 included in the fair valuation of FFB was 291,652 MT
(2018: 370,299 MT) and 87,373 MT (2018: 142,976 MT) respectively. The Group and the
Company attribute a fair value on the FFB prior to harvest at each statement of financial
position date as required under MFRS 141 “Agriculture”. FFB are produce of oil palm trees
and are harvested continuously throughout the financial year to be used in the production of
crude palm oil (“CPO”). Each FFB takes approximately 22 weeks from pollination to reach
maximum oil content to be ready for harvesting. The value of each FFB at each point of the
FFB production cycle will vary based on the cumulative oil content in each fruit. In
determining the fair values of FFB, management has considered the oil content of all unripe
FFB from the week after pollination to the week prior to harvest. As the oil content accrues
exponentially in the 2 weeks prior harvest, the FFB prior to 2 weeks before harvesting are
excluded in the valuation as the increase in fair values are considered negligible. The
valuation model adopted by the Group and the Company is a discounted cash flow model
which includes all cash inflows, cash outflows and imputed contributory asset charges where
no actual cash flows associated with the use of assets essential to the agricultural activity are
accounted for. The net present value of cash flows is then determined with reference to the
market value of CPO at the reporting date, adjusted for freight, extraction rates, production,
transportation, contributory asset charges and other cost to sell at the point of harvest.
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Changes to the assumed tonnage included in the valuation will have a direct effect on the
reported valuation. Growing canes represent the standing canes prior to harvest whereby the
values are dependent on the age, sucrose content and condition as at the statement of financial
position date. During the financial year, the Group harvested approximately 165,680 MT
December 2019 included in the fair valuation of growing canes of the Group was 258,040
MT (2018: 319,315 MT). The determination of fair value for the Group’s growing canes
requires estimates to be made of the anticipated canes harvest, its age and sugar prices. These
statistics and production forecast. Fair value of the harvested canes is based on the accepted
industry benchmark of allocating the fair value of sugar production between the fair value
attributable to the canes grower and the value attributable to the miller. The fair value of the
growing canes at the statement of financial position date is based on the estimated fair value
of the growing canes less further costs to be incurred in growing and harvesting the canes up
to the point of harvest and contributory asset charges. If the estimated harvest volume of
canes increased or decreased by 10% (2018: 6%), fair value changes in growing canes would
accordingly. Livestock comprise the cattle livestock included within the Group’s beef
production operations. Cattle livestock generally fed for 120 days prior to use for beef
production. During the financial year, the Group produced 1,957,5 tonnes (2018: 982.2
tonnes) of beef. The umber of cattle as at 31 December 2019 included in the fair values of
livestock was 24,625 heads (2018: 23,527 heads). The fair value of livestock is based on the
Group’s assessment of age, average weights and market values of the livestock at the
statement of financial position date. If the average weight per cattle increase or decreases by
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1% (2018: 1%), fair value changes in livestock would have increased or decreased by
3.0 MFRS 141 Agriculture is a short standard that has significant impact on the entities
affected by this standard, and it applies to Sime Darby Plantation that grow or rear biological
assets for profit. The principle of the standard is that the value of such assets increases over
time, and are to be recognised as income as the asset grows and develops, rather than solely
upon harvest or sale. MFRS 141 now requires biological assets and agriculture produce to be
measured at fair value through profit and loss. However, measuring fair value poses
significant challenges due to the inherent risk in using judgement that can be construed as
assets occurs both prior to maturity and after maturity. A cost model ignores biological
transformation when it occurs. That is why IAS 41 requires fair value measurement. “Those
who support fair value measurement argue that the effects of changes brought about by
biological transformation are best reflected by reference to the fair value changes in
biological assets. They believe that fair value changes in biological assets have a direct
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