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354 MSM MALAYSIA HOLDINGS BERHAD WHO WE ARE STATEMENT & DISCUSSION BY OUR LEADERS HOW WE OPERATE
ANNUAL INTEGRATED REPORT 2021

NOTES TO THE FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2021

31 RESERVES
(i) Reorganisation deficit (non-distributable)

Reorganisation deficit comprises the difference between the fair value of 577,979,800 new ordinary shares issued at
RM3.50 per share on 20 May 2011 and the carrying amounts of the sugar business as at January 2010. It is recognised
as reorganisation deficit in accordance with the predecessor method of accounting.

(ii) Merger relief reserve (non-distributable)
Merger relief reserve comprises the 577,979,800 new ordinary shares with a par value of RM0.50 each issued at a fair
value of RM3.50 per share for the acquisition of entire equity interests in MSM Prai Berhad and MSM Perlis Sdn Bhd
on 20 May 2011. The difference between par value and fair value is recognised as merger relief reserve in accordance
with section 60(4) of the Companies Act 1965.

(iii) Foreign exchange reserve
The foreign exchange reserve is used to record exchange difference arising from the translation of the financial
statements of foreign operations whose functional currencies are different from that of the Group’s presentation
currency.
(iv) Cash flow hedge reserve
The Group manages its cash flow interest rate risk with floating-to-fixed interest rate swaps which are designated in
cash flow hedge relationships.
To the extent this hedge is effective, the change in fair value of the hedge instrument is recognised in the cash flow
hedge reserve. The gain or loss relating to the ineffective portion of the interest rate swaps is reclassified to profit or
loss and recognised within ‘finance cost’.