MKH Annual Report 2019

210 A N N U A L R E P O R T 2 0 1 9 31. ACQUISITION OF SUBSIDIARIES AND ASSOCIATES (CONT’D) In the previous financial year (a) On 16 January 2018, Kajang Resources Corporation Sdn. Bhd. (“KRC”), a wholly owned subsidiary of the Company, acquired 2 ordinary shares representing 100% of the equity interest in MKH Property Ventures Sdn. Bhd. (“MPVSB”), for a cash consideration of RM2. Subsequently on 28 February 2018 and 27 March 2018, KRC subscribed for 509,998 and 19,890,000 new ordinary shares in MPVSB, representing 51% of the total allotment of 999,998 and 39,000,000 new ordinary shares respectively. The said acquisition did not give rise to a material impact on the financial statements of the Group. (b) On 17 January 2018, the Company acquired 2 ordinary shares representing 100% of the equity interest in Metro Readymix Sdn. Bhd., for a cash consideration of RM2. The said acquisition did not give rise to a material impact on the financial statements of the Group. 32. FINANCIAL GUARANTEE The Company 2019 2018 RM RM Corporate guarantees given by the Company to financial institutions and creditors for banking and credit facilities granted to the subsidiaries:  Outstanding as at financial year end 638,519,708 646,246,556 The financial guarantees have not been recognised since the fair value on initial recognition was immaterial as the financial guarantees provided by the Company did not contribute towards credit enhancement of the subsidiaries’ borrowings in view of the securities pledged by the subsidiaries and it is not probable that the counterparties to financial guarantee contracts will claim under the contracts. 33. CONTINGENT LIABILITIES (a) On 18 April 2016, PT Maju Kalimantan Hadapan (“PTMKH”), a subsidiary of the Company, received a tax assessment letter from the Indonesia’s Director General of Tax (“DGT”) for the year of assessment 2012, to restrict the claims on net realised and unrealised foreign exchange losses incurred amounted to IDR97,700 million, equivalent to RM30.7 million. According to the tax objection in Balikpapan, Indonesia, on 19 June 2017, DGT restricted PTMKH’s claims on net realised and unrealised foreign exchange losses up to IDR7,414 million, equivalent to RM2.3 million instead of abovementioned IDR97,700 million. Based on applicable corporate income tax rate of 25%, the restricted amount of the net realised and unrealised foreign currency exchange losses of IDR90,286 million, equivalent to RM28.4 million will result in over- recognition of tax benefit of IDR22,571 million, equivalent to RM7.1 million in the financial statements of the Group and PTMKH. On 6 August 2018, PTMKH received official verdict letter from the DGT for year of assessment 2012’s tax appeal. The entire net realised and unrealised foreign exchange losses of IDR90,286 million, equivalent to RM28.4 million is allowable to claim as expenses in the tax return submitted by PTMKH. NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2019