On 1 January 2019 Mrs. Bavani, Mr. Aduka and Ms. Chong owned 51%, 22% and 10% respectively

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Question:

On 1 January 2019 Mrs. Bavani, Mr. Aduka and Ms. Chong owned 51%, 22% and 10% respectively of the ordinary shares that carry voting rights at a general meeting of shareholders of Suria Indah Bhd (Suria Indah). All ordinary shares carry equal voting rights. Mr. Aduka is the finance director of Suria Indah and he earns a salary of RM200,000 per year from Suria Indah. Ms. Chong is the daughter of Mr. Chong, the founder of Suria Indah. She inherited her shares in Suria Indah from Mr. Chong. Ms. Chong lives abroad and is a passive investor.

On 30 June 2020 Mr. Aduka’s spouse, Mrs. Aina is the sales director of Suria Indah. She receives a salary of RM100,000 per year from Suria Indah. On 1 January 2020 Mr. Aduka and Mrs. Aina’s son (Aaron) began serving an apprenticeship with Suria Indah. Like other apprentices at Suria Indah, he is paid RM20,000 per year for his services. In 2020 Mrs. Bavani acquired a motor vehicle from Suria Indah for its market value of RM100,000. The purchase price was settled on the date of sale. Before its sale to Mrs. Bavani, the motor vehicle had been used by Suria Indah’s sales staff.

On 1 January 2020 Bank Adawang lent RM1,000,000 to Suria Indah. Repayment of the principal and interest is secured by a guarantee registered in favour of the bank against the private home of Mrs. Bavani. The loan bears interest at the fixed rate of 10 per cent per year, compounded annually. Suria Indah has a contractual obligation to repay the loan and accrued interest on 31 December 2028. Suria Indah and Mr. Daud own 75% and 25% respectively of the ordinary shares that carry voting rights at a general meeting of shareholders of Mentari Cahaya Sdn Bhd (Mentari Cahaya). All ordinary shares carry equal voting rights.

Mr. Aduka, Mrs. Bavani and Mr. Daud are members of the board of directors of Mentari Cahaya. Mr. Aduka and Mrs. Bavani each receive a salary of RM10,000 per year from Mentari Cahaya. In addition to being a director Mr. Daud is responsible for the day-to-day management of Mentari Cahaya. He receives a salary of RM110,000 per year from Mentari Cahaya. In 2020 Mentari Cahaya sold a machine with a carrying amount of RM75,000 to Suria Indah at its market value of RM90,000. Suria Indah, Mr. Elex and Ms. Goh own 45%, 45% and 10% respectively of the ordinary shares that carry voting rights at a general meeting of shareholders of Seri Elena Sdn Bhd (Seri Elena). All ordinary shares carry equal voting rights. Suria Indah and Mr. Elex have contractually agreed to share control over Seri Elena. Suria Indah’s accounting policy is to account for investments in jointly controlled entities using the cost method.

Seri Elena manufactures goods from the by-product of Suria Indah’s production process. In 2020 Seri Elena received of 20 tonnes of by-product from Suria Indah at its market value of RM1,000 per tonne.

REQUIRED:

Identify the related parties and non-related parties of Suria Indah according to MFRS 124 Related Party Disclosures. Justify your answers.