Reference no: EM132745939

Ikonic Bhd has been operating in hospitality and construction industry for more than five decades. The company's annual report for the year ended on 30 June 2016 had already been prepared by the company's accountant. The board of the director of the company announced, on 1 August 2016, that the annual report of the company will be issued three months after the company's year-end. The following are additional information and events which have not been considered in the preparation of Ikonic's Bhd financial statement:

1. Ikonic Bhd had among its receivable a debtor, Comfort Guess Bhd. with a balance of RM368,000 as at 30 June 2016. There is no provision of doubtful debt that had been made in respect of this debt since the board of director of IKONIC Bhd. was of the opinion that the debt was wholly collectible. On 31 July 2016, IKONIC Bhd. was informed that Comfort Guess Bhd., due to its financial difficulty, had been placed under receivership.

2. Ikonic Bhd purchased a building in the middle of 2010 at a cost of RM12 million. The building was estimated to have a useful life of 45 years. Ikonic Bhd has depreciated the whole building using straight line method over 45 years, commencing from 2010. However, the building comprises of an escalator and other fixtures which have significantly different useful lives. On August 2015, the newly appointed accountant of Ikonic Bhd realises that the escalator and other fixtures of the building should be separately depreciated. However, the details accounts of these fixed assets have not been kept and it is impracticable for the company to determine the respective costs and accumulated depreciation amounts of these assets if they had been separately depreciated since 2010.

3. On 5 September 2016, as part of its expansion strategy, Ikonic Bhd had acquired 550,000 ordinary shares of par value of RM1.00 each, representing 100% of equity interest in Luxury View Bhd for a total consideration of RM1.3 million. Consequent to the acquisition, Luxury View Bhd has become a wholly-owned subsidiary company of Ikonic Bhd.

4. In January 2014, Ikonic Bhd entered into a contract to build a luxury resort. The project is scheduled to be completed in June 2017. The contact price is RM417 million. The company, for the accounting year ended on 30 June 2014 and 2015 adopted the completed contract method under which no profits is recognised until the project is completed. When it is realised that it is the percentage of completion method that shall be adopted as per requirement of MFRS 111 Construction Contract, the company immediately adopted this method for the accounting year ended on 30 June 2016.

REQUIRED:

Problem 1: Based on MFRS 108 Accounting Policies, Changes in Accounting Estimates and Errors and MFRS 110 Events after the Reporting Period, classify each of the above transaction whether it is a change of accounting policy, change of accounting estimates, an error or subsequent events after the reporting dates and explain the appropriate accounting treatment for the transactions.