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http://cdr.uum.edu.my/jspui/handle/123456789/165| Title: | The Smell, Taste and Touch of Money An Accounting Policy Decision |
| Authors: | Abdul Malak, Siti Seri Delima Mustapa, Ifa Rizad Che Ahmad, Ayoib |
| Keywords: | MIM;UPC;acquire;investment;auditor;recognition;measurement |
| Issue Date: | 2022 |
| Abstract: | The case revolved around the injection of RM18,000,000 by the parent company (UPC) to its subsidiary, MIM. The fund had flowed in 2017 to the amount of and had been utilised to acquire an investment. The external auditor for MIM, MJ and Associates, had then advised that the fund should be recognised as equity, since UPC is the parent of MIM. However, in February 2018, as they started to convene with accountants for UPC for its consolidated financial statements, the initial recognition of the fund resurfaced. UPC used a different external auditor for its financial statement, that is GA and Associates. From the eye of the external auditor, they saw the fund differently. The partner was doubtful that it was an equity and leaning towards debt. Eventually, the fund was recognised as a debt. The decision to recognise the fund as a debt was starting to bite. The investment had not been generating enough income. MIM had to service debts but with no adequate returns of investment. A key contention to the consolidation of the parent was the repayment of the debt from the injection of fund. The deadline to finalise the consolidated financial statements for UPC loomed. If not, they would be heavily scrutinised by the regulators. The case investigated the events surrounding the initial recognition and measurement of the investment fund. As equity, the injection of fund affects MIM had painted the financial statements of MIM rosier. Its recognition as debt had put a strain. Students would need to assess the dilemma in the recognition of the investment fund and its subsequent consequences. |
| URI: | http://cdr.uum.edu.my/jspui/handle/123456789/165 |
| Payment Link: | http://epay.uum.edu.my/go.php?billcode=CDRCASE&productid=TC216-1 |
| Appears in Collections: | Cases in CDR |
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