Reference no: EM132531679

On 1 January 2008, Snowy Bhd purchased 8 million ordinary shares in Winter Bhd for RM12 million. On the acquisition date, Winter Bhd's shareholder's equity comprises of ordinary share capital of RM10 million (RM1 each) and retained profit of RM3.5 million. All the goodwill on consolidation of Winter Bhd has been impaired by 31 December 2012.

To expand its operation internationally, Snowy Bhd decided to restructure its operations and was considering selling some of its shares in Winter Bhd. Summer Bhd offered to purchase some of the shares in Winter Bhd on the following terms:

Offer 1 was to purchase 7 million shares on 1 January 2013 for RM17.5 million.

Offer 2 was to purchase 4 million shares on 1 July 2013 for RM15.6 million.

The forecast retained profit of Winter Bhd at 1 January and 31 December 2013 are as follows:

Date - Retained profit

1 January 2013 - RM15 million

31 December 2013 - RM35 million

• It is estimated that the fair values of Winter Bhd's shares on 1 January 2013 and 1 July 2013 are RM2.50 and RM3.90 respectively.

All profits are deemed to accrue evenly throughout the year.

Questions:

Question 1: Advise Snowy Bhd as to which offer it should accept in order to exert significant influence over Winter Bhd.

Question 2: Explain how the disposal of shares in Winter Bhd should be accounted for in the consolidated financial statements of Snowy Bhd Group for the year ended 31 December 2013 based on your answer above.