Asset Impairment: A Study on MFRS136 and Denko Industrial Corporation Berhad

RUNNING HEAD: ACCOUNTING
asset impairment

Accounting 1
Contents
Introduction...........................................................................................................................................2
Description of the Company..................................................................................................................2
MFRS136 items of disclosure...............................................................................................................3
Disclosure compliance and format of the company...............................................................................5
Recognition and measurement...............................................................................................................9
Summary.............................................................................................................................................12
Conclusion...........................................................................................................................................13
References...........................................................................................................................................14

Accounting 2
Introduction
This report contains detail information about the standard MFRS136 which is related to
impairment of assets. It also shows the manner in which the impairment is been disclosed and
presented in the annual report of the selected company that operates in Malaysia. The
company is Denko Industrial which is listed on Bursa Malaysia and is an investment holding
company. The later part of the report discusses the requirements of disclosure and the format
followed by Denko for reporting its impairment exercise. In addition to that, the recognition
and measurement of MFRS136 is also discussed. All the findings of the report are then
presented in nutshell under the head summary, followed by the conclusion. The discussion
made in the report is been summarized in the last part of the report and is presented in a
concise manner.
Description of the Company
Denko Industrial Corporation Berhad is an investment holding company which operates in
the country named Malaysia. It was incorporated in 1989 under the name Ecodynamic (M)
Sdn Bhd. Later on it change the name to Denko Industrial and in 1990, it was transformed
into a public listed company and get listed on Second Board of Kuala Lumpur Stock
Exchange- Bursa Malaysia in 1991, the year when the history of expansion began for Denko
(Denko. 2018).
The segments of the company include snack food, plastic and moulding and others. Snack
food segment is involved in the trading of food stuff and consumer goods. The section
operates as a wholesaler and trader provide consumable food items across the country.
Another segment named as plastic and moulding is engaged in manufacturing or designing of
plastic moulded elements and products. These components are later sold in both domestic and
international markets (Reuters. 2018). The other divisions of the company deals with the

Accounting 3
investment holding. Denko also provides management services to its customer and operates
in countries other than Malaysia, popularly known as United States of America, Asia –
Pacific and Europe. There are many subsidiaries of the company that are engaged in
providing food stuff and plastic parts. Winsheng Plastic Industry Sdn. Bhd., PT. Winsheng
Plastic and Tooling Industry and Lean Teik Soon Sdn. Bhd are the subsidiaries involved in
the manufacturing of plastic components and tooling fabrication along with the selling of
consumable goods (Bloomberg. 2018).
The key products of the firm are vacuum foams, packing materials, lease property, plastic
raw materials and pipes, garments made up of polyester, cotton and many other fabrics. It
also produces various types of chemicals and semi-finished products. Talking about the
financial highlights, the revenue of Denko has increased to RM 102 million in 2017 as
compare to the previous year. However, despite of an upsurge in sales, the company has
reported a net loss amounted to RM 11,289 thousands in year 2017 as compare to the profit
made prior to that (Bloomberg. 2018). This has eventually resulted in the deduction of
shareholders’ funds from RM 56 million to RM 45 million. In addition to that, the EPS of the
company was negative due to the loss and the amount of total assets has also reduced in 2017.
Overall, it can be said that Denko needs to improve its performance in order to enjoy growth
and success. As the company is publically listed on Bursa Malaysia, it is traded with a ticker
of DICM.KL (Reuters. 2018).
MFRS136 items of disclosure
Malaysian Accounting Standards Board (MASB) developed and introduced a framework
which consists of certain standards which are required to be followed by every Malaysian
company listed on Bursa Malaysia. The framework is named as the Malaysian Financial
Reporting Standards (MFRS). Adopting such framework is considered as a significant
milestone in the capital market as it enables the companies to fully comply their financial