BACHELOR (HONS) ACCOUNTING

SEM 5 (JAN-APR) / 2021

BBFA 2303

INTERMEDIATE FINANCIAL ACCOUNTING II

MATRICULATION NO : 980129025812001

IDENTITY CARD NO. : 980129-02-5812

TELEPHONE NO. : 010-2398988

E-MAIL : iqahishamudin98@gmail.com

LEARNING CENTRE : OUM SEBERANG JAYA

Assignment 1

Q1

Diversification of investment is very importance for a company to build up their

portfolio in a better, the more the company having differences types of investment the higher
the security of the company. As the most popular phrase we always receiver from great
investor such as warren buffet, do not put all of your eggs in basket, diversify your
investment, so that when the market crash, you won’t lose all of your assets. There are 3 type
of corporate investment in the business which are ownership investment, lending investment
& cash equivalent. Each one of it provide different ways of profit to the company (Amer A.
A. J., et al, 2014).

Ownership investment which referring to large thing like stocks, properties, and it
refer to investment where buyer owns the asset for real. This is a common type of investment,
and accountants may help to ensure these investments still have markets and keep on
producing income and profit. Next is lending investment which equivalent to buying debt
with expectation that the debt will be repaid for example like bonds, saving accounts, treasury
inflation protected securities and others. Lastly is cash equivalent, this type of investment is
known as an investment that are as good as cash it is easy to liquidate them back to cash, if
needed. For example, like money market funds. And companies that have a good portfolio
should have few of these investments in their business (B., 2014).

When deciding on how to invest, business’s saving can choose to diversify which
invest part of the savings in risky stocks with high return and another part in much safer
investment for example like safer bonds. And from here, business can come out with decision
making in general to choose between risky options or vice versa. Studies shows,
diversification of investment for business in risky way & assets can focus mainly on
investor’s decision (B., 2014).
Q2

Owner of the company will need to invest and arrange management time to provide
information for the investor to continue monitoring funds. For the first time and earlier
company will have a smaller share in the business in both as a percentage and in absolute
monetary terms. Sometimes it can be and there’s legal and regulatory issues to comply when
raising finance for the business is occurred, for example like when promoting investments.

Advantages of equity finance

Raising money for business by equity finance provide many credits, including:

 The funding committed to business and also upcoming and current projects by the
company. Investors will only realise their investment when business is running and
doing well for example like, through stock market flotation or maybe sale for new
investors.
 Will not require to keep up with costs of bank loan interest or debt finance, that
allows company to use the capital fund raised for running business and business
progress.
 External investors will expect the business to deliver value in return, helping business
to explore and execute growth ideas for a better revenue and income for the company
in future
 Business venture capitalists can come out with valuable skills, contacts and
experience to the business benefit. They can also help out with strategies and key for
decision making.

Investors have an eager interest in the business' success, as it is guaranteed them for higher
return on their investment for example, company’s growth, profitability and increase in value
in matter of business. Investors always prepared to provide continuous funding for company
as the business grows (Noor M. A. W., et al 2020).
Disadvantages of equity finance

Other than its advantages, they are few things that it's worth and should be considering which
are:

 Raising equity finance is demanding, very costly and caused time consuming, and it
may take away management focuses on the main core of the business nature.
 Potential investors will keep on investigate comprehensive background information
on the owner and also business. They will look forward and carefully on past results
and forecasts decision and potential things and will triggered the management team.
However, most of the businesses find this process is useful and necessary regardless
of whether or not any fundraising is successful to raise for the business capital.
 Depends on the investors in the business, owner of the company will lose a few
amounts of their power to make decisions on behalf for the management (Hill, Joseph
& Oh S. T., , 2020).

Debt Financing

Borrowing money to funding the operations and business growth can be the right decision
based on the right and proper circumstances. The owner of the company doesn't have to stop
controls on the business, but too much debt can forfeit the growth of the company to run
smoothly.

Advantages of Debt

 Easier to control, since taking out a loan for fund is temporary. The terms will end
when and once the debt is repaid. The lender does not have any authority to say in
how the owner should runs the business or won’t have any voices in the company in
decision making.
 Taxes: Loan interest taken for financing and funding company is tax deductible, while
dividends paid to shareholders are not. It helps for company to runs smoothly and
save up bucks.

 Predictability: Principal and interest payments are stated in advance as per agreement,
so it is easier to work out on these into the company's cash flow and financing. Loans
taken can be short-, medium- or long-term debt for financing and can planning for the
payment cycle for the company to settle down the debt (Noor M. A. W. et al 2020).
Disadvantages of Debt

 Qualification and Criteria: As for applying loan, the company and the owner required
to have an acceptable credit levels to qualified for the loans.
 Fixed payments: Principal and interest amount must be paid on specified dates on
time without fail to avoid any bad credit profile. Businesses that have unpredictable
amount of cash flows in the company might have difficulties in arranging payment for
loans. Decreases in sales can create serious problems in meeting the requirement to
pay the loans on the specific date.
 Cash flow: to having a high debt for loans can turns the business into more problems
and likely to caused problems to make payments for the loan if the cash flows us the
company is not sturdy. Investors will also see the company as a higher risk investment
and be reject and avoid to make additional equity investments in the future.
 Collateral: Loan lenders will usually demand for certain assets of the company to be
held as collateral, and the owner of the company is required to guarantee the loan by
personal.

When deciding funds to finance the business progress, the owner has to extra carefully
consider the goods and disadvantages of taking out loans or seeking additional investors for
company’s financing. The decision must be involves weighing and prioritizing a lot of factors
to come out with decision which method will be most beneficial and useful in the long-term
for company’s sake. The more the company’s debt equity ratio, the riskier the company is
considered by loan lenders and investors towards the company. A business is limited as per
amount of debt it can carry only (Hill, Joseph & Oh S. T., , 2020).

Q3

Advantages of property investments

 Tax deductions
All expenses on maintenance, counselling fees, stamp duty or any preparation of the house
for tenant and cost of hiring a managing agent all can be filed for tax deductions at the end of
the year. Depreciation of the property value in the market can also be considered in filing for
tax write-offs and deductions also (Lee L. L., et al 2017).
 Decreases volatility
Most times, people see stocks investment as high-risk investments and it can make you
bankrupt if you’re not carefully analyse the market. This is one of the reasons why most of
the people invest on properties as they’re less volatile compared to shares and similar options
such as stocks, bonds and many more (Lai, M. M. et al., 2001).

 Sole management
Owner of the property have the rights to do whatever they decided or want to do with the
property, such as designs, planting, styling and deco, preference colours, all of these such
criteria can be changed according to owner’s preference. The owners also free to choose
whoever they wanted to rent or sell the property to as they have fully rights on the property
(B., 2014).

 Capital growth
By purchasing property in a developing and promising centre location and city, it is a
decision that can make the investor or owner of the house became rich. Residential areas with
high business traffic will surely promising to generate more profit compared to a property in
a rural area as the busy traffic area is always crowded with working areas which always
people’s first choice to stay as it is easy access and near to the office (NG P. L., Janice Y. L.,
& Maimunah S., 2013).

 Tangible asset
By having an asset that can be seen and touch creates a very comforting feeling that a person
has bought something that is solid and stable for a long time. Plus, other than that, there’s a
very limited supply of land in future while the demand for property always continues to
increase, so it’s preferably to grab a piece of it for now for future fortune received as the
property will keep on increase time by time (B., 2014).
 Added income
Renting property is one of the best ways to earn from proper investment for nowadays. After
deduction from the tax and maintenance costs of the house, investor or owner will still get a
decent amount of income from tenant without doing anything too much unless for keep on
eyes on the condition of the house and tenant usage of the house to avoid any damage or loss
happen on the property. For example, if the mortgage costs RM 1,200 and maintenance will
cost another RM 200, owner of the house will still have money to pocket if setup rental
payment to tenant of property for a RM 1,800 (NG P. L., Janice Y. L., & Maimunah S.,
2013).

Disadvantages of property investments

 High cost
Investing in property, a person will never own the land for small amount like RM 100. It’s
not same with the others investment such as stock, bonds where people can own it by
purchasing just few shares and lot while properties is like all in or nothing at all. Investing in
property don’t a allow to only purchase or buy a small part for example to fit the budgets like
RM1,000, it requires huge capital in order to fit in this kind of investment and business.

 Interest rates
Paying for the properties sometimes will experience few troubles regarding the interest rates
that keeps on increases in numbers. The monthly repayments for the loan unexpectedly will
higher than amounts earning from the tenant that renting the property due to bad inflation that
can happen in this property business and investment.

 Liquidity
As properties is a tangible asset and it is not as liquid or known as intangible asset such as
stocks or other investments where people can withdraw and take out their money anytime,
they need or want. Just in case there’s emergency happen that required a good amount of
cash, a person will not be able to convert their properties in cash as fast as other investment.

 Problematic tenants
These things happen as it is out of someone’s control and things can happen unexpectedly
even if the owner screen all the tenants first before applying to their property to the tenant.,
the owner wont really get to capture on how the tenants will behave only after they get
accepted and pass through the screening. Even though its not normal to be getting a
misbehaved tenant that might cause mess and chaotic to property they’re renting, it’s
advisable to always be prepare for the worst that can be happening by include additional
funds for the maintenance costs for the tenants.

 Maintenance
Property investment is not a one-time thing where people only need to spend money upon
purchase at the first, but there are few cumulative costs and monthly fees that need to be paid
off and bear with. Plus, the maintenance of the property such plumbing, repairing, plumbing,
security, electricity, telephony and many more is a consumable fee that requires continuous
payment that is nowhere near cheap.

 Liability probability
There are few aspects and criteria on purchasing properties to ensure that it turns to asset
instead of liability for the people’s portfolio, such as location. Purchasing properties at a poor
location will not only cause loss for the owner but it might not perform as an asset but
liability to the buyer. It’ll be hard to look for any potential buyers and it may take time like
few years before the purchased properties returns are realized or if there’ll be any. Purchasing
properties takes a lot of consideration before having one (Lai, M. M. et al 2001).

Assignment 2

Q1

Company 1

Company’s name : Parkson Holding Berhad

Nature of business : Investment Holding

Board of Directors : Y. Bhg. Tan Sri Cheng Heng Jem

(Chairman and Managing Director)

: Ms Cheng Hui Yen, Natalie

(Executive Director)
 : Cik Zainab binti Dato’ Hj. Mohamed

: Mr Liew Jee Min @ Chong Jee Min

: Mr Ooi Kim Lai

Secretaries : Ms Lim Kwee Peng

(MAICSA 7015250)

: Ms Choo Yoon May

(MAICSA 7044632)

Company No : 89194-P

Registered Office : Level 14, Lion Office Tower

No. 1 Jalan Nagasari

50200 Kuala Lumpur

Wilayah Persekutuan

Tel No: 03-21420155

Fax No: 03-21413448

Website: www.lion.com.my/parkson

Share Registrar : Secretarial Communications Sdn Bhd

Level 13, Lion Office Tower

No. 1 Jalan Nagasari

50200 Kuala Lumpur

Wilayah Persekutuan

Tel Nos: 03-21420155, 03-21418411

Fax No: 03-21428409

Company Background

The Company is a public limited liability company, incorporated and domiciled in Malaysia,
and listed on the Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”). The
registered office and the principal place of business of the Company are both located at Level
14, Lion Office Tower, No. 1 Jalan Nagasari, 50200 Kuala Lumpur, Wilayah Persekutuan.

The principal activity of the Company is investment holding. The principal activities of its
subsidiaries are set out in Note 15. There have been no significant changes in the nature of
the principal activities of the Company and of the Group during the financial year.

The financial statements were authorised for issue by the Board of Directors in accordance
with a resolution of the Directors on 7 October 2019.

Product & Services

Parkson being a true-blue Malaysian brand and household name for over 30 years has a
responsibility to its customers to ensure that all merchandise carried by its stores fulfil
customers’ expectations. Hence, the Group places high priority on the quality of the products
offered to its customers and ensures that its suppliers share the same philosophy.

Their F&B businesses adhere strictly to the Food Safety Management Policy to manage food
safety in the operations of their F&B stores and the Standard Operating Procedures (“SOPs”)
laid down by their brands’ overseas Principals which have very stringent food safety policies.

The Group’s financial services business under Parkson Credit Sdn Bhd (“Parkson Credit”)
provides hire purchase and credit sale financing to customers for purchase of motorcycles and
household appliances; as well as offering money lending services. Parkson Credit is ISO-
certified and Syariah-compliant and in conducting its business operations, adopts responsible
financing best practices and is committed to providing affordable and quality financial
services in line with its corporate values and within the regulatory framework. Its risk
management function is in place to oversight the credit and business risks with its business
model and credit policies based on regulatory guidelines, risk experience and management
know-how.
Company’s milestone

 Director and senior managers from the Group’s business operations including Head
Office Functions attended the Senior Managers Meeting at the Group Head Office on
12 and 13 February 2018 to brainstorm and set the direction going forward in the new
year.
 Parkson Branding Outlet opened its doors at Mitsui Outlet Park on 26 January 2018.
 Parkson credit Sdn Bhd held a ceremony to mark its venture into the insurance
business on 24 January 2018.
 Parkson opened a new store at M Square Mall, the new retail and lifestyle hub in
Puchong, Selangor on 24 January 2018.
 Property Division had its Customers Appreciation Dinner on 20 January 2018.
Financial Highlights
Company 2

Company Background

 7-Eleven was founded by J. C. Thompson in 1927 as The Southland Ice Company in

Dallas, Texas. Started as an ice vendor, the company eventually began offering milk,
bread and eggs on Sundays and evenings when grocery stores were closed. This new
business idea produced satisfied customers and increased sales, spawning the
precursor of the modern convenience retail concept.
 The company’s first convenience outlets were known as Tote’m stores since
customers “toted” away their purchases, and some even sported genuine Alaskan
totem poles in front. In 1946, Tote’m became 7-Eleven to reflect the stores’ new,
extended hours - 7 a.m. until 11 p.m., seven days a week. The company’s corporate
name was changed from The Southland Corporation to 7-Eleven, Inc. in 1999.

Products & Services

 They are the pioneer and the largest 24-hours convenience store operator in Malaysia.
Upon achieving its 1,000 mark in stores network, 7-Eleven Malaysia opened its door
to local entrepreneurs through its unique franchising program in 2009. They are the
first franchisor in the local market to offer existing profit-making stores to
franchisees. 7-Eleven stores can be found across bustling commercial districts to
serene suburban residential compounds throughout Malaysia, from petrol stations and
LRT stations to shopping malls and medical institutions. 7-Eleven is Always There
for You.
 Each 7-Eleven store carries over 2,200 SKUs, including our proprietary brands
Slurpee frozen beverages and Aiskleem™ an exclusive range of soft serve. The
variety of products and services available at 7-Eleven include bill payment services
(TM, Astro, U Mobile, Syabas and Singer), sale of mobile phone reload cards,
IDD/STD, Touch ‘n Go reload service, gift cards (Google Play, SONY and Netflix),
online purchases payment service (Razer Cash), e-Wallets acceptance (Touch ‘n Go,
Razer Pay and Alipay) photocopying, fax, automated teller machine (ATM) and
bulletin board for neighbourhood community notices.
  In 2009, 7-Eleven introduced fresh brewed coffee and other hot beverages together
with packaged fresh food and bakery for the convenience of customers looking for
ready-to-eat hot food. All food items sold in 7-Eleven are certified HALAL and
undergo stringent quality control to ensure tastefulness and freshness

Board of Directors

 Tan Sri Dato’ Seri Abdull Hamid Bin Embong

 Chairman, Independent
 Non-Executive Director
 Colin George Harvey
 Executive Director/ Chief Executive Officer
 Tan U-Ming
 Executive Director
 Chan Kien Sing
 Non-Independent Non-Executive Director
 Tan Wai Foon
 Non-Independent Non-Executive Director
 Tsai, Tzung-Han
 Non-Independent Non-Executive Director
 Muhammad LukmanBin Musa @ Hussain
 Independent Non-Executive Director
 Puan Sri Datuk Seri Rohani Parkash Binti Abdullah
 Independent Non-Executive Director
 Shalet Marian
 Independent Non-Executive Director
Financial Highlights
Q2

Company 1 – Parkson Holdings Berhad

In Parkson Holding company, under the equity method, initially it will be recognised
at cost for the investment in an associate or a joint venture. The carrying amount of the
investment adjusted to recognise if there are any changes in the Group’s share of net assets
from the associate or joint venture from the acquisition date. And for any Goodwill that is
related to the associate or joint venture also will be included in the carrying amount of the
investment and will not be tested for individually (Berhad P. H., 2019).

After implication for equity method, the Group will only decide whether it is
necessary to be taking an impairment loss on its investment in its associate or by choosing
joint venture. At each reporting date, the company Group will determine either there is
objective evidence that the investment in the associate or joint venture that will be impaired
(Berhad P. H., 2019). If happen there is any such of the evidence, the Group will only
calculate the total amount of the impairment as the difference between the recoverable cost of
the associate or joint venture as it carrying value, and then capture the loss in the Group’s
statement of profit or loss. Based on the loss of significant influence over the associate or
joint control over the joint venture, the Group measure, records and recognises any balance
investment at its fair value. Any difference between the carrying amount of the associate or
joint venture upon loss of significant influence or joint control and the fair value of the
retained investment and proceeds from disposal is recognised in profit or loss (Berhad P. H.,
2019).

.
 Properties investment under construction (“IPUC”) are initially recorded at cost value,
including transaction costs value. Subsequent to first recognition, investment properties are
recorded at cost value less accumulated depreciation and any accumulated impairment losses.
These property investments are depreciated to take off the value over the unexpired lease
terms ranging from 1.9% to 2.4% per annum (2018: 1.9% to 2.4% per annum). IPUC are not
depreciated as they are not yet ready for their intended use. Properties investment are
derecognised whether when they have been taken of or when they are permanently
withdrawn from use and no future economic benefit is expected from their disposal (Berhad
P. H., 2019). Any gain or loss on the retirement or disposal of an investment property is
captures and recorded in the statements of profit or loss in the year of retirement or disposal.
Transfers are made to or from property investment only when there is a change in use. For a
transfer from property investment to owner-occupied property, the deemed cost for
subsequent accounting is at their fair value at the changes in use date. For a transfer from
owner-occupied property to property investment, the property is accounted for in accordance
with the accounting policy for property, plant and equipment up to the changes in use date
(Berhad P. H., 2019).
 Financial assets at FVPL include financial assets were being held for trading.
Financial assets held for trading consist of investment securities, derivatives and financial
assets required principally for the purpose of selling or repurchasing them in the near term.
Subsequent to initial recognition, financial assets at FVPL are measured at their fair value
(Berhad P. H., 2019). Gains or losses gaining from changes on its fair value of the financial
assets are captured and recorded in profit or loss. Net gains or net losses on financial assets at
FVPL does not include exchange differences, interest and dividend income. Exchange
differences, interest and dividend income on financial assets at FVPL are captured separately
in profit or loss as part of other income or other expenses as well. The Group and the
Company measure debt instruments at FVOCI if both of the following conditions are
completed (Berhad P. H., 2019).

As for debt instruments at FVOCI, interest income, foreign exchange revaluation and
impairment losses or reversals are recognised in the statement of profit or loss and computed
in the same manner as how financial assets are recorded and captures at amortised cost value.
The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative
fair value change recognised in OCI is recycled to profit or loss (Berhad P. H., 2019). Upon
initial recognition, the Group can elect to classify irrevocably its equity investments as equity
instruments designated at FVOCI when they meet the definition of equity under MFRS 132
Financial Instruments: Presentation, and are not held for trading. The classification is
determined on an instrument-by-instrument basis. Gains and losses on these financial assets
will not be recycled to profit or loss (Berhad P. H., 2019). Dividends are recognised as any
other income in the statement of profit or loss when the right of payment established except
when the Group benefits from such proceeds as a recovery of part of the cost of the financial
asset, in which case, such gains are recorded in OCI. Equity instruments designated at
FVOCI are not subject to impairment assessment (Berhad P. H., 2019).
Company 2 – 7-Eleven Malaysia Holdings Berhad

As for 7 Eleven company, property investment such as land or building are being held
by the Group or held under a finance lease, to earn income from the rental or for capital
appreciation or it can be for both, property investment is recorded initially at cost value,
including any transaction cost amount (Berhad 7.-E. H., 2019). Subsequent to initial
recognition, property investment is recognised and recorded at fair value cost, to reflect
market conditions at the date of reporting. Gain or loss arising from change in the fair value
cost of property investment is included in profit or loss in the period in which they increase,
including the corresponding affect from tax (Berhad 7.-E. H., 2019).

Property investment is derecognised whether when it has been disposed of or when it

is permanently taken out from use and there’s no future economic benefit is expected in
return from the disposal (Berhad 7.-E. H., 2019). The difference between the net disposal
continues and the carrying amount of the asset is captured in profit and loss in the period of
derecognition. When an indication of impairment come out, the carrying cost of the asset is
write off immediately to its recoverable amount value. The policy for the recognition and
measurement of impairment losses is in accordance with Note 2.10 (Berhad 7.-E. H., 2019).

As at 31 December 2019 and 31 December 2018, the fair value of the property
investment is based on a valuation performed by Hartanah Consultants (Valuations) Sdn Bhd,
which is an independent professional valuer specialising in valuing these property
investments. Fair value of the property investment was decided using the market comparison
method (Berhad 7.-E. H., 2019). This means that valuation performed by the valuer is based
on the market prices that is active adjusted for differences in the nature, location or condition
of the specific property (Berhad 7.-E. H., 2019).
Q3

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B., P. B. (2014). External Factors Affecting Investment Decisions of Companies. Economics

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Berhad, 7.-E. H. (2019). Annual Report 2019. Kuala Lumpur, Malaysia: 7-Eleven Holdings
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Berhad, P. H. (2019). Annual Report 2019. Kuala Lumpur, Malaysia: Member of Lion
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Hill, Joseph & Oh S. T., . (2020). The Relationship Between Heuristics Behaviour and
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Lai, M. M., Low, K. L. T., & Lai, M. L. (2001). Are Malaysian Investors rational? The
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NG P. L., Janice Y. L., & Maimunah S. (2013). Performance of Malaysian Property

Investment Vehicles.

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