Analyse the issue(s)/problem(s) faced by SSB by referring to the MFRS 137 Provisions, Contingent Liabilities and Contingent Assets (CTPS Question –Problem analysis) Suwit Semailee Berhad (SSB) is a manufacturer of branded and generic prescriptionpharmaceuticals, vaccines and over-the-counter medications, based in Penang, Malaysia. Thecompany was established in 2000 and it is now in the process of business expansion pace. Thecompany closes its account on 31 March.The following is the summary of SSB's statement of financial position as at 31 December 2021(the third quarter of the accounting year):quity and LiabilitiesAssetsPlant (net)InventoryRM2,725,000 Share capital-ordinary575,000 Retained earnings550,000 Accounts payable410,0004,260,000RM 2,000,0001,885,000375,000ReceivablesCash4,260,000SSB is fighting a legal case with Boleh Jadi Berhad (BJB) for two years. There was atransaction between both companies in 2019 where BJB was supposed to supply goods to SSBfor the return of RM600,000. The goods were delivered far behind the agreed date and someof the goods had already expired. BJB offered to replace all the goods, but SSB did not agreefor replacement and denied payment to BJB. The case was filed in court by BJB demanded afull payment and compensation of RM400,000 for the harassment. It has been two years andthe court will continue the hearing in February 2022. It seems that SBB is losing the case andtotal payment of RM1,000,000 is to be made to BJB. Mr Aidil, the accountant of SSB Bhd isnot familiar with this event and not sure on how to account for the court case.The company currently issued 800,000 ordinary shares. The management is planning todistribute 20% share dividend as part of strategy to move its retained earnings to share capital.Due to the need for business expansion, the management is also considering on the issuance ofmore shares to induce the capital of the company. Among the options is issuing additional200,000 ordinary shares at a price of RM2.75 per share. Another option is issuing 9%preference shares, whether a non-cumulative or callable preference share. The CEO in theearlier discussion with two of the directors showed more interest in issuing ordinary sharesrather than preference. However, the two directors had the opposing view due to certainreasons.On 1 January 2022, the company issued 100,000 ordinary shares at a price of RM2.75 pershare, for the exchange of herbal oil extraction machine worth RM290,000. Despite thearguments on the types of shares to be issued, the company also on the same date, issued300,000 ordinary shares for RM2.80 per share. The legal fees incurred in relation to theissuance of the share were RM3,000.The decisions on issuing ordinary shares were passed by a simple majority among board ofdirectors. The two directors involved in the initial discussions with the CEO are still notsatisfied with the decision. They plan to have another meeting with the CEO on the matters.2

MFRS 137 Provisions, Contingent Liabilities, and Contingent Assets belong to the Malaysian Financial…

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Analyse the issue(s)/problem(s) faced by SSB by referring to the MFRS 137 Provisions, Contingent Liabilities and Contingent Assets (CTPS Question –Problem analysis)

Suwit Semailee Berhad (SSB) is a manufacturer of branded and generic prescription
pharmaceuticals, vaccines and over-the-counter medications, based in Penang, Malaysia. The
company was established in 2000 and it is now in the process of business expansion pace. The
company closes its account on 31 March.
The following is the summary of SSB's statement of financial position as at 31 December 2021
(the third quarter of the accounting year):
quity and Liabilities
Assets
Plant (net)
Inventory
RM2,725,000 Share capital-ordinary
575,000 Retained earnings
550,000 Accounts payable
410,000
4,260,000
RM 2,000,000
1,885,000
375,000
Receivables
Cash
4,260,000
SSB is fighting a legal case with Boleh Jadi Berhad (BJB) for two years. There was a
transaction between both companies in 2019 where BJB was supposed to supply goods to SSB
for the return of RM600,000. The goods were delivered far behind the agreed date and some
of the goods had already expired. BJB offered to replace all the goods, but SSB did not agree
for replacement and denied payment to BJB. The case was filed in court by BJB demanded a
full payment and compensation of RM400,000 for the harassment. It has been two years and
the court will continue the hearing in February 2022. It seems that SBB is losing the case and
total payment of RM1,000,000 is to be made to BJB. Mr Aidil, the accountant of SSB Bhd is
not familiar with this event and not sure on how to account for the court case.
The company currently issued 800,000 ordinary shares. The management is planning to
distribute 20% share dividend as part of strategy to move its retained earnings to share capital.
Due to the need for business expansion, the management is also considering on the issuance of
more shares to induce the capital of the company. Among the options is issuing additional
200,000 ordinary shares at a price of RM2.75 per share. Another option is issuing 9%
preference shares, whether a non-cumulative or callable preference share. The CEO in the
earlier discussion with two of the directors showed more interest in issuing ordinary shares
rather than preference. However, the two directors had the opposing view due to certain
reasons.
On 1 January 2022, the company issued 100,000 ordinary shares at a price of RM2.75 per
share, for the exchange of herbal oil extraction machine worth RM290,000. Despite the
arguments on the types of shares to be issued, the company also on the same date, issued
300,000 ordinary shares for RM2.80 per share. The legal fees incurred in relation to the
issuance of the share were RM3,000.
The decisions on issuing ordinary shares were passed by a simple majority among board of
directors. The two directors involved in the initial discussions with the CEO are still not
satisfied with the decision. They plan to have another meeting with the CEO on the matters.
2

Definition Definition Costs that a business is responsible for paying, should a particular event potentially occur in the future. Also called a potential liability, a contingent liability is generally recorded only when the amount of liability can be reasonably estimated and the contingency is likely to occur shortly. The Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Principles (IFRS) make it mandatory for the companies to record any contingent liability taking the principles of full disclosure, materiality, and prudence into consideration.

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