FAR610 Advanced Financial Accounting and Reporting

Helixor Bhd is a well-established and reputable player in the home appliances industry, with extensive experience in the manufacturing, marketing, and after-sales support of a wide range of household electrical products. Over the years, the company has built a strong market presence by consistently delivering reliable and high-quality appliances that meet consumers’ evolving needs. Its operations are supported by an integrated business model that ensures efficiency across production, distribution, and customer service, enabling the company to maintain a competitive edge in the industry.

In response to the growing demand for its products across various market segments and geographical areas, the Board of Directors of Helixor Bhd has carefully evaluated the company’s current capacity and future growth potential. Recognising the limitations of operating within a single corporate structure, the Board of Directors has proposed a strategic expansion initiative through the establishment of subsidiaries. This approach is intended to enhance the company’s ability to penetrate new markets more effectively, strengthen its distribution networks, and improve overall operational scalability.

By forming subsidiaries, Helixor Bhd aims to expand market coverage, enabling its products to reach a broader customer base while adapting to specific regional preferences and demands. This expansion strategy is also expected to improve organisational flexibility, facilitate better resource allocation, and support long-term sustainability. Ultimately, the establishment of subsidiaries will position Helixor Bhd to capitalise on growth opportunities, reinforce its market leadership, and continue delivering value to both customers and shareholders.

Investment in Stratos Bhd

Stratos Bhd is a company specialising in the logistics and transportation of home appliance products. Stratos Bhd has been a subsidiary of Helixor Bhd since 1 January 2023, when Helixor Bhd acquired 70% of Stratos Bhd’s ordinary shares. The consideration was paid in cash of RM320 million, while the other components of equity and retained profit of Stratos Bhd were RM36 million and RM58 million, respectively. The fair value of Stratos Bhd’s net assets on the date of acquisition was equal to the carrying amount.

Investment in Nova Bhd

On 1 January 2024, Helixor Bhd acquired 80% of Nova Bhd’s ordinary share capital and 25% of the 8% debentures of Nova Bhd, for a total cash consideration of RM122.5 million. The debentures were acquired at its’ face value of RM12.5 million. Nova Bhd’s principal activity is designing and manufacturing of “White Goods” home appliance products.

On the date of acquisition, the other components of equity and retained profit of Nova Bhd were RM24 million and RM39 million, respectively. The fair value of Nova Bhd’s plant was RM 1 million in excess of its carrying amount at the date of acquisition. The remaining useful life of the plant was 10 years as of the date of acquisition. This amount has not been adjusted in Nova Bhd’s books to reflect its fair value.

On 1 January 2025, Helixor Bhd acquired another 10% of the ordinary shares of Nova Bhd. The acquisition was satisfied by issuing 2 ordinary shares of Helixor Bhd for every 5 ordinary shares acquired at RM5.60 per share. This transaction has not been recorded by Helixor Bhd. As at that date, the fair value of the identifiable net assets of Nova Bhd was equal to its carrying value except for the unadjusted fair value for the plant as mentioned above.

Investment in Vertex Bhd

On 1 January 2025, Stratos Bhd acquired 20 million out of 25 million units of ordinary shares of Vertex Bhd for cash of RM60 million. Vertex Bhd has been involved in the manufacturing and retailing of portable of home appliance products since 2013. However, Stratos Bhd has yet to record this transaction as of year-end. At the acquisition date, the carrying amount of Vertex Bhd’s net assets was equal to their fair value, except for a freehold land, which had an excess of RM500,000 over its’ carrying amount.

Subsequently, as at 31 December 2025, the property was revalued, resulting in an increase of RM250,000. These revaluations have not been incorporated into Vertex Bhd’s accounts as at year-end.

Investment in Arcadia Bhd

On 1 July 2025, Helixor Bhd acquired 30% interest in Arcadia Bhd for a cash consideration of RM15 million. Arcadia Bhd manufactures and distributes smart home appliances and wellness products. Helixor Bhd had a significant influence over Arcadia Bhd’s operating and financial policies. The fair value of Arcadia Bhd’s net assets on this date was equal to the carrying amount. For the year ended 31 December 2025, Arcadia Bhd has reported a net profit of RM5.8 million.

The following information was taken from the books of Helixor Bhd’s group.

Statement of Financial Position as at 31 December 2025

Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2025

Helixor Bhd Statement of Changes in Equity for the Year Ended 31 December 2025

Stratos Bhd Statement of Changes in Equity for the Year Ended 31 December 2025

Nova Bhd Statement of Changes in Equity for the Year Ended 31 December 2025

Vertex Bhd Statement of Changes in Equity for the Year Ended 31 December 2025

Additional Information

1. In May 2025, Helixor Bhd sold goods on credit to Stratos Bhd and Nova Bhd at an invoice price of RM20 million and RM10 million, respectively. Stratos Bhd and Nova Bhd have managed to sell off one quarter and 10% respective of these inventories to Star Sdn Bhd, a third-party company at 40% mark-up.

As at year-end, Stratos Bhd has not settled any of the amount due, while Nova Bhd has remitted RM5.4 million of the amount due to Helixor Bhd on 29 December 2025. However, Helixor Bhd has only received the amount on 2 January 2026.

2. During the current financial year, Helixor Bhd disposed of a machine to Vertex Bhd for RM13 million. The machine has 5 year useful life when bought in 2023 for RM15 million.

3. In 2025, Nova Bhd also sold a motor vehicle to Stratos Bhd at RM5 million. On the disposal date, the remaining useful life of the motor vehicle was 5 years. Nova Bhd charged annual depreciation of RM700,000 prior to the disposal.

4. During the year, Arcadia Bhd sold inventories worth RM2.5 million to Helixor Bhd. However, 80% of these inventories have been sold on credit to customers.

5. At the end of the year, the investment in Arcadia Bhd was reviewed, and it was concluded that the investment is impaired by RM50,000.

6. Half of Nova Bhd’s bills payable were in favour of Stratos Bhd and Stratos Bhd has discounted 30% of these bills.

7. For the year ended 31 December 2025, the goodwill from the acquisition of Stratos Bhd has been impaired by 20%. The impairment loss has yet to be recognised in Helixor Bhd’s financial statements.

8. All companies except of Arcadia Bhd, had provided ordinary dividends at the year-end. However, the investor still did not record the dividend received.

9. Preference dividends have been declared. Both investors and investees have recorded these transactions accordingly.

10. Interest on debentures for the year ended 31 December 2025 has been paid by related companies and charged as expenses in their respective Statements of Profit or Loss for the current year. Helixor Bhd has recognised its share of interest in debentures from its subsidiary in its investment income.

11. The group measured its non-controlling interest at its proportionate share of the fair value of identifiable net assets of the subsidiaries as at the acquisition dates.

12. Profits and losses are deemed to accrue evenly throughout the year.

13. All inter-company sales within Helixor Bhd’s Group attracts 25% mark-up.

14. Depreciation is calculated on a yearly basis and is charged fully in the year of acquisition and none in the year of disposal.

Required

a. Compute goodwill/bargain purchase on acquisition of Stratos Bhd, Nova Bhd and Vertex Bhd.

b. Compute the carrying amount of investment in Arcadia Bhd as at 31 December 2025.

c. Calculate change in shareholding arising from the acquisition of additional shares in Nova Bhd.

d. Prepare the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 31 December 2025.

e. Prepare the Consolidated Statement of Changes in Equity for the year ended 31 December 2025.

f. Prepare the Consolidated Statement of Financial Position as at 31 December 2025.

Experts Answer on Above Questions on Financial Accounting

Goodwill/Bargain Purchase

Stratos Bhd

The calculation of goodwill is performed by utilising the consideration transferred (RM320 million) and deducting the Helixor’s share of the fair value of identifiable net assets. The Goodwill value is derived from the excess purchase consideration as the fair value equals the carrying amount. The Goodwill recognised is subject to reduction by 20% impairment as provided in the additional information.

Nova Bhd

The calculation of goodwill is done after adjusting the plant’s fare value upward by RM1 million. It leads to an increase in the subsidiary’s identifiable net assets and reducing any goodwill.

Vertex Bhd

Goodwills is calculated on the basis of Stratos Bhd’s 80% acquisition. The adjustment is performed with respect to identifiable net assets for RM500000 fair value increase in free hold land.

Carrying amount of investment in Arcadia Bhd

By way of applying the equity method, the initial investment is RM15 million, an addition of 30% share of Arcadia’s post acquisition profit which will be RM5.8 million*30% = RM1.74 million. The impairment loss is deducted at RM50000. The measurement of investment is therefore performed at cost plus share of profit less impairment.

Change in ShareHolding – Nova Bhd

There is an increase in the ownership of Helixor from 80% to 90%. It is considered as an equity transaction because the control is already there. That is no additional recognition of goodwill, and the difference between the consideration paid and reduction in NCI is adjusted directly in equity.

Want Detailed Answers with References?

An analysis on the accounting consolidation assignment above by including goodwill, associated, NCI, consolidated financial statements and intercompany adjustments showed important findings. Our accounting experts can provide detailed responses including step by step calculations for all the questions above. Choose our accounting assignment writing service for best assignment help services in Malaysia.