Lively Bhd has developed a new business model whereby it sells music licences to other companies,...
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Lively Bhd has developed a new business model whereby it sells music licences to other companies, delivering digital music to consumers. Lively Bhd has agreed to work with Go Bhd to develop a new music platform. On 31 December 2020, the companies created a new entity, Softech Bhd, with equal shareholdings and shares in profit. Lively Bhd has contributed its intellectual property through employee expertise, cryptocurrency with a carrying amount of RM3 million (fair value of RM4 million) and an office building with a carrying amount of RM6 million (fair value of RM10 million). The cryptocurrency has been recorded at cost in Lively Bhd's financial statements. Go Bhd has contributed technology and marketing expertise. The board of Softech Bhd will comprise directors appointed equally by Lively Bhd and Go Bhd. Decisions are made by a unanimous vote. Required: Based on Malaysia Financial Reporting Standards (MFRS10), advise the directors on the following: The classification of the investment which Lively Bhd has in Softech Bhd; i) 5) (4 marks) The derecognition of the assets exchanged for the investment in Softech Bhd and any resulting gain/loss on disposal in the financial statements of Lively Bhd at 31 December 2020. (6 marks) (Your answer should also briefly consider whether fair value movements on the cryptocurrency should be recorded in profit or loss). Lively Bhd has developed a new business model whereby it sells music licences to other companies, delivering digital music to consumers. Lively Bhd has agreed to work with Go Bhd to develop a new music platform. On 31 December 2020, the companies created a new entity, Softech Bhd, with equal shareholdings and shares in profit. Lively Bhd has contributed its intellectual property through employee expertise, cryptocurrency with a carrying amount of RM3 million (fair value of RM4 million) and an office building with a carrying amount of RM6 million (fair value of RM10 million). The cryptocurrency has been recorded at cost in Lively Bhd's financial statements. Go Bhd has contributed technology and marketing expertise. The board of Softech Bhd will comprise directors appointed equally by Lively Bhd and Go Bhd. Decisions are made by a unanimous vote. Required: Based on Malaysia Financial Reporting Standards (MFRS10), advise the directors on the following: The classification of the investment which Lively Bhd has in Softech Bhd; i) 5) (4 marks) The derecognition of the assets exchanged for the investment in Softech Bhd and any resulting gain/loss on disposal in the financial statements of Lively Bhd at 31 December 2020. (6 marks) (Your answer should also briefly consider whether fair value movements on the cryptocurrency should be recorded in profit or loss).
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Strategic Management An Integrated Approach
ISBN: 978-1111825843
10th edition
Authors: Charles W. L. Hill, Gareth R. Jones
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