Trillion Fantasy or Fallacy?

Historic figure?

Is it reflecting the international trading position and the economy?

Or did it represent a half truth?

Someone told me, half truth is equal to half lie and it's no better or worse than a great lie.

Take an example, Company A, a Public Listed Company (PLC) was awarded a project XYZ to built a road awarded by the government (PWD) with a contract value of RM500mil. As most of PLCs had over 100 subsidiaries and associated companies, the parent company would then sub-contract the project to one of it's subsidiary called Company B at a contract value of RM475mil which means PLC would make a gross profit of RM25mil (5% of contract sum).

Then B company would sub-contract the works in packages - the structural works to Company C, the architectural works to Company D and the M&E works to Company E, all of which are subsidiaries of PLC and at a total sum of RM450mil (which means Company B makes a gross profit of RM25mil.

Company C, D, and E then sub-contract the labour works to Company F,G, and H and the supply of materials would be procured from Company J,K,L,M and N, all of whom are also subsidiaries of the PLC. In the financial statements, Companies C,D and E reported a forecasted profit of a total sum of RM10mil each and a total gross profit of RM30 for the 3-companies.

F,G,H would also report projected profit of RM5mil each and that would be a total of another RM15mil.

Of course, supplier J,K,L,M, and N would also report projected profit of say RM1mil each which totaled up to RM5mil.

Financial Report:

Company A Group Consolidated Results	Revenue (RM mil)	Expenses Sub-contract (RM mil)	Gross Profit (RM mil)	Profit Margin
Company A	500	475	25	5%
Company B	475	450	25	5.2%
Company C,D & E	450	420	30	6.6%
Company F,G & H	420	405	15	3.5%
Company J,K,L,M & N	405	400	15	3.7%
Group Consolidated Results	2,250	2,140	110	4.9%

To summarized, Company A in their group financial results would have posted a total turnover (revenue) from project XYZ alone that totaled RM2.25bil. They only had one project that is worth RM500mil but the revenue from that project alone can be ballooned up to 5-times. Equally, the gross profit would total up to a sum of RM110mil which will be about 22% of Project XYZ, while at company’s level, the profit margin is around 3.5% to 6.6%.

Isn’t it great result? What if Company A had 5 of such projects and continues to acquire other companies as subsidiaries? That’s accounting and that’s financial reporting.

RM1 trillion, is it difficult to make a presentation? It is wonderful?