Sime Darby Berhad is a leading conglomerate in Malaysia. The company, which originally operated in the plantation

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Question:

Sime Darby Berhad is a leading conglomerate in Malaysia. The company, which originally operated in the plantation sector, has expanded its business wings to several other sectors such as motoring, logistics, industry and healthcare. One of its subsidiaries, Sime Darby Plantation Sdn Bhd (SDPSB) specializes in plantation operations and produces agricultural products. Currently, SDPSB has a farm area of almost 250,000 hectares in Peninsular Malaysia and over 85,000 hectares in Sabah and Sarawak.

Among the agricultural products produced by the company are palm oil, rubber, cocoa and livestock. Most of the company's farm products are processed in its own factories located in almost every state in Malaysia, except for some farm products that are far from its processing plants. For such farm products, SDPSB contracts the sale of raw farm products (fresh fruit bunches of oil palm-FFB) to nearby factories. In addition, SDPSB-owned factories also buy raw materials that are farm products from nearby communities.

Products marketed by SDPSB include crude palm oil (CPO), refined palm oil (MST), palm kernel oil (KPO) and fresh fruit bunches (FFB) from oil palm plantations, and Standard Malaysian Rubber II (SMR II) from rubber plantations for export and local purposes. As SDPSB has many farms and is located in almost all states in Malaysia, the transaction contracts to market its products are also quite diverse and depend on the management of the respective SDPSB-owned farms and factories.

For example, for a contract of sale of crude palm oil (CPO), the price offered if a single transaction is dependent on the price set in the international market on the day of the transaction. But if the buyer wants to buy several products at once (multiple contract transactions), the price offered is relatively low by 0.5 to 2 percent as a marketing incentive and consumer loyalty. This strategy is also done when there are several contracts agreed in a transaction.

One of the farms owned by SDPSB located in Kuala Pilah, Negeri Sembilan has been gazetted to conduct research and development (R&D) activities for the biodiesel industry. To that end, a research facility has been built and operated using agricultural products from the farm. The rest of the agricultural products from the farm (which are not used for research purposes) are sold to a nearby factory, which in return agrees to give a discount on the price of fertilizer which is a by -product of the factory to the SDPSB farm.

Apart from research and development on the biodiesel industry, the facility at the Kuala Pilah estate is capable of carrying out various research for the industry downstream palm oil products such as health products and the construction industry. Sometimes SDPSB leases the facility to other companies who are interested in conducting such research. The government through certain agencies also provides various grants for research purposes. SDPSB through the plantation also collaborated with the Malaysian Palm Oil Board (MPOB) to conduct further research for the purpose of marketing the research findings in the form of biodiesel products and similar technologies.

Questions:

Explain by justifying and referring to the relevant standards (as appropriate):

Five steps in revenue recognition.
How the results from the activities of Sime Darby Plantation Sdn Bhd should be accounted for and disclosed.
How the results are obtained from the research facility owned by Sime Darby Plantation Sdn Bhd located in Kuala Pilah should be accounted for.