Accounting for Managers: Malaysia Pacific Corporation Berhad Analysis

This report provides a comprehensive analysis of Malaysia Pacific Corporation Berhad's financial performance, focusing on the impact of the 1998-2004 financial crisis and subsequent recovery efforts. It examines the company's main business segments, financial milestones, and key drivers, incl...Read More

Running head: ACCOUNTING FOR MANAGERS
Accounting for managers
Name of the student
Name of the University
Authors note

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Introduction:
Malaysia pacific Corporation Berhad was incorporated in year 1973 with its main
business being investment and property developments and is based in Malaysia. In 1997, the
organization was listed on Kuala Lampur Stock exchange. Main segments of company are
investment property, property development and construction. Some of the projects undertaken by
company are Rejuvenation center, ASIA pacific trade and expo-City Aptec, Retail mall, Halal
center and entertainment city of Nusa Paradis. Vision of organization is to build harmonious
society and increasing income and social stability. Mission of organization is to integrate the
supply chain, coordinating education and creating more opportunities for jobs and employment
The company suffered major financial problem in the aftermath of financial crisis that happened
in year 1998 to 2004. A huge impairment loss was recognized by company in year 2006 that
resulted in wiping out of 80% of Issued share capital. In the past few years, company for
generating cash adopted no easy route by breaking the concept of NUSA Damai’s Aptec city
(Alam et al., 2016). As a consequence of this, company faced financial hardship during the
period of hard consolidation planning.
Financial milestones and key initial driver:
An uphill task was faced by Malaysia pacific for overcoming the past unfavorable track
records of heavy losses with banks. The benefits of mutual long-term relationship of organization
can be improved with the help of current management structure. In the financial crisis outcome
during the period of 2008, there was no sales of investment properties by group. During this date
in the after math of financial crisis, there was no disposal or purchase of quoted securities by the
organization. There was not any corporate disposal during this period. Total amount of debt
owing to company during the financial stood at RM 176201. There was no interim dividend that

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was recommended by the company. Loss was generated per share to shareholders and due to anti
diluted effects of warrants, there was no disclosure of diluted earnings per share. The annual
audited financial statement brought forward from the year 2007, there was no amendment of
plant, equipment and property valuation. In year 2008, organization has revalued investment
properties of group (Hoyle et al., 2015).
Organization was designated a PN 17 status company as it ran into the situation of
financial problem in the aftermath of financial crisis. In year 2004, organization was on verge of
liquidation. Under an initial exercise of rescue by organization, former controlling shareholders
and Hong Leong group approached Top lander offshore for becoming a passive substantial
shareholder. Unfortunately, a special waiver was granted for undertaking general mandatory
office and former board and management was asked to resign. When Top lander has taken the
control of organization, a new Chief executive officer, new board was appointed in year 2005
after the former management, and board was asked to resign. The company was renamed from
Malaysia pacific land Sdn to Bhd to Malaysia pacific Corporation Berhad. Change in company’s
name was paved for diversifying into new business apart from development of business
(Williams, 2014).
Restructuring of investment property in crisis aftermath:
In the aftermath of financial problem, company to re brand Taman Nusa Damai into new
iconic city took immediate steps and the rebranding was done to increase the property value. If
company would have stick to the development of low and medium cost housing, huge liability
and loss would have incurred to company. Various housing overhang was faced by the
management of organization resulting in improvement in the property value. Government of
Malaysia for APTEC project of Malaysia pacific received strong support. During the

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consolidation of project, financial hardship was faced by organization for obtaining the necessary
approval. It was perceived that the grand vision of APTEC project would be destroyed if the
management did not want to destroy the APTEC design integrity integrated by city concept. The
development phase and implementation stage of construction was kick started in financial year
2014 when the assets value have risen and reached maturity. With this new development
impetuous in 2014, it is being anticipated that worst situation of organization will get over and
organization will be on new threshold (Brown, 2014).
Organization has acquisition of additional interest in subsidiary in previous financial year
that is 2015. Acquisition method of accounting is applied for accounting business combination.
Costs related to acquisition are recognized as expenses in the period in which costs are incurred.
At the date of acquisition, any contingent consideration payable is recognized at fair value. The
business combination costs allocated to identifiable liabilities, assets, contingent liabilities at the
acquisition date is measured at fair value (Bekhet & Yasmin, 2014).
Despite the increase in revenue of organization to 16.33 million from 12.58 million, there
was a fall in net income of Corporation Berhad to 427.21%. The reason attributable to fall in net
income was resulting from increase in cost of goods sold as a percentage of sales to 90.87% from
54.4% (Mpcb.com.my 2017). Year on year there was fall in net income of organization rising
revenue. Highest loss was experienced by Malaysia pacific resulting from impairment loss on
assets that were held for sale in the wake of global crisis. Group incurred net operating costs of
RM 4.003 million and auditors were incapable for obtaining sufficient evidence in determining
the accuracy and completeness of such costs incurred.

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Impacts of downfall of organization in terms of external and internal aspects:
In the first, half the economic crisis, Malaysian was economy was resilient but the
companies operating in country was seriously impacted by the global downturn. The aftermath of
financial crisis, the market of property and investment was no longer booming and has remained
stagnant that has considerably influenced the growth of Malaysia Pacific Corporation Berhad.
However, property market was comparatively cheaper in Malaysia compared to other economies
or country. The global financial crisis has resulted in declining sales of property as prices was
reaching sky high. The major property development project of the organization was delayed due
to industrial slowdown and loss of investors’ confidence. It is argued as per the theory of
propriety cost, the costly process of additional voluntary disclosures was not afforded by
company in wake of financial crisis and the reason is attributable to the fact of competitive costs
and related preparation. After the financial crisis, company disclosed lees voluntary information
and this has hampered the confidence of investors and the company was forced to be more
involved in social activities for legitimizing their existence (Shahbaz et al. 2013). It was also
argued that public were in need of support from organization for maintaining their confidence.
The impact of global financial crisis influenced the organization both internally and
externally. There was premature defaults and high-resolution costs for the company. On
receivables, organization has extended payment delays in times of declining sales that lead to
rapid depletion of working capital of Malaysia pacific Corporation Berhad. Organization was not
able to obtain short term financing due to increased rate of insolvency resulting from financial
crisis. This was also because of tightening credit policies of banks in Malaysia that has reduced
the borrowing capacity of organization to finance their investment. However, the effect of
monetary policies was eased by rising the interest rates to an unprecedented level. Alternative

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sources of finances was adopted by Malaysia pacific due to worsening access to credit such as
mobilization of reserves and factoring. In light of instability of banking sector and contraction of
wealth resulting from economic crisis, organization witnessed strong possibility of reversing
inflow of capital (Jomo, 2016). For the shareholders of organization, the share price was
extremely volatile since financial crisis. Since the financial crisis, there was a severe downfall in
the price of shares of that has adversely impacted the generation of profits.
Reasons associated with business downfall:
The vulnerability of business in the wake of financial crisis of Pacific corporation was
attributable to its poor structure of its corporate governance and the external factor was the weak
financial sector. Malaysian economy has faced an increased exposure to property sector. There
was underpinning of credit boom and equity market bubble due to erosion in the quality of
economy macroeconomic management (Bekhet & Yasmin, 2014). Furthermore, there was a
massive increase in nonperforming loans due to property market crash such as Malaysia pacific
corporation and overall economic collapse. Organization narrowly focused on short-term capital
flows
Some of the internal impact of this downfall was increased corporate disclosure by
getting more involved in programs concerning corporate social responsibility. Following the
recent global crisis, quality of corporate disclosure in the annual report of organization was
improved. One of the most widely disclosed category was the information on corporate social
responsibility (Deegan, 2013). It was ascertained that company utilized the annual report
voluntary disclosures as a means of influencing the perception of society in an attempt t
legitimize their existence the economy.

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Since the financial crisis, the amount of debt of Malaysia pacific Corporation Berhad was
continuously increasing and value of trade payables increased. The current year did not
witnessed any significant changes in the groups’ principal activities. Rental income was the main
source of revenue of the investment property of group. Organization has revaluated their
investment property and this has led to significant increase in net asset per share, profit before
tax and after tax. Valuation of property has led to gain in fair market value compared to valuation
in previous year that is 2010. The price of property has risen tremendously since year 2012 in
Iskandar Malaysia and in relation to this, price of property has not risen as much it should rise
(Ang & McKibbin, 2014). Group also intends to redevelop their investment property through
ongoing negotiation of joint venture. Credits revolving the group and some of the banks
overdraft would be offset by unlocking the value of asset through the disposal of building and
joint venture. It is expected that positive cash flow would be contributed to the group’s project
by injecting new capital through few potential investors.
Malaysia pacific has property development program in place that would help in
progression of residential projects and these projects would help in generation of sufficient cash
flow intended for satisfying the banks debt obligations. In the aftermath of financial crisis,
Malaysia pacific has made proper disclosure of their corporate governance that will help in
gaining the interest and confidence of shareholders. With regard to settlement agreement in
respect of amount owing to their creditors, settlement will be identified in exchange of some
certain parcels of land. However, in the recent year, the annual report of the amount does not
disclose any facts pertaining to recoverability. There is restructuring of banking facilities of the
group that will assist them in gaining amount of loan borrowed (Lucas & Verry, 2016).

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Conclusion:
The present era of economic globalization over the past two decades are prone to shocks
that challenge the economic sustainability dynamism of open economies. When looking at the
external impact of fall in property market such as Malaysia pacific, it can be said that country
needs a policy of fiscal framework for ensuring the consistency between investor confidence in
housing and property and social objectives. From the above analysis of the financial
performance of Malaysia pacific Corporation Berhad, witnessed severe downfall and continuous
fall in share price that has adversely affected the confidence of shareholders in the organization.
However, after the recovery of Malaysian economy, the property market started gaining
momentum that pushed up the share price. The rise in price was not considerably high but the
recovery was on path. Nonetheless, there was increasing revenue year on year but despite of
rising revenue, there was significant fall in the net income of organization. The decline or
downfall of Malaysia pacific has significant social impact on both internal and external aspects.
All this has led to increased corporate disclosures of the Malaysian organization such as Berhad.

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