| Under
these accounting entries, PLC A, despite the fact that
it has disposed K Sdn Bhd to Y Sdn Bhd, was actually
receiving no money. Essentially, Y Sdn Bhd became the
debtor of PLC A.
Since
Y Sdn Bhd did not have sufficient funds to pay PLC A,
Mr A concocted another strategy. The ultimate aim of
this strategy was to clear the debt owed by Y Sdn Bhd
to PLC A without the need for the company to pay a single
cent!
This
strategy involved Z Pte Ltd a subsidiary of Y Sdn Bhd,
which was located in Bahamas. Z Pte Ltd was asked to
provide professional services to PLC A and for this
services PLC A was charged RM30 million. The amount
of fees charged by Z Pte Ltd to PLC A was the same amount
Y Sdn Bhd owed to the listed company. In truth, there
were no professional services rendered to PLC A, but
then, no one could verify that. The following entry
was then recorded in PLC A’s Income Statement:
| 3 |
PLC
A, Income Statement for the year ended 30 November
200x |
| |
Debit |
Expenses
(Professional fees charged by Z Pte Ltd via
Y Sdn Bhd) |
RM30
million |
As
for the balance sheet, the following entry was recorded:
| PLC
A , Balance Sheet as at 30 November 200x |
| Credit |
Other
Creditors:
(Professional fees owed to Y Sdn Bhd) |
RM30
million |
From the scenario depicted here, the following may be
observed:
| 1) |
Y
Sdn Bhd owed PLC A RM30 million for the purchase
consideration of the K Sdn Bhd |
| 2) |
PLC
A owed Y Sdn Bhd RM30 million for the professional
services rendered by Z Ptd Ltd |
| 3) |
Since
the amount owed by the two companies to each other
was the same, they decided to offset the debts.
Hence, no money would need to change hands. |
|
