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ACCA Financial Reporting > 1: Consolidated Statement of Financial Position (CSFP) > Flashcards

1: Consolidated Statement of Financial Position (CSFP) Flashcards

1
Q

What are four motives to acquire influence in another company?

A
  • to reduce competition in the marketplace
  • to diversify into new markets (whether industry markets or geographical markets)
  • to bring expertise in-house (e.g. retailers bringing manufacturing in-house)
  • to benefit from synergies arising from the acquisition
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2
Q

What is IFRS 10?

A

Consolidated financial statements

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3
Q

What is the sole basis for consolidation?

A

Control

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4
Q

Under IFRS 10, what is the first element that comprises control?

A
  1. Power over the investee
    where the investor has existing rights that gives it the current ability to…
    direct activities that significantly affect the investee’s returns
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5
Q

Under IFRS 10, what is the second element that comprises control?

A
  1. Exposure, or rights to, variable returns from involvement in the investee
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6
Q

Under IFRS 10, what is the third element that comprises control?

A
  1. The ability to use power over the investee to affect the amount of the investor’s returns.
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7
Q

IFRS 10 states that investors should do what?

A

Periodically consider whether control over an investee has been gained or lost.

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8
Q

Describe when an investor…

Exercises the majority of voting rights in an investee

A

Hold more than half of the voting rights in an investee.

Usually in the form of ordinary shares.

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9
Q

When can an investor holds the majority of the voting rights but no power.

A 
This could be due to the companies actions being 
subject to direction by 
-government, 
-court administrator,
-receiver, 
-liquidator 
-regulator.
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10
Q

What is IAS 1?

A

Presentation of Financial Statements

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11
Q

What is IFRS 3?

A

Business combinations

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12
Q

What is the aim of IFRS 3?

A

To specify how to account when one entity gains

control of another

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13
Q

Are group consolidated financial statements produced alongside or instead of the individual financial statements?

A

Alongside

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14
Q

What do we call it when negative Goodwill arises?

A

A bargain purchase?

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15
Q

What do we do when negative goodwill arises?

A

Credit it directly to the statement of profit and loss

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16
Q

What are the two allowable ways to measure goodwill and Non-controlling interest?

A
  • Fair value method

- Proportion of net assets method

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17
Q

Maybe add in the W1-5 proformas here?

A

OK

18
Q

How is fair value measured?

A

Using the market value of the subsidiary’s shares at the

date of acquisition

19
Q

How is Proportion of net assets measured?

A

By calculating their share of the fair value of the subsidiary’s net assets at acquisition.

20
Q

What is the double entry for Impairment of Goodwill for…

Fair Value Method?

A 
DR NCI (NCI percentage)
DR Group Retained Earnings (Group percentage)

CR Goodwill (100% of the impairment)

21
Q

What is the double entry for Impairment of Goodwill for…

Proportion of net assets?

A

DR Group retained earnings (100% of the impairment)

CR Goodwill (100% of the impairment)

22
Q

What is the double entry for…

Immediate transfer of cash

A

Dr Investment in XX

Cr Cash

23
Q

What is the double entry for…

Immediate transfer of shares

A

Dr Investment in XX
Cr Equity share capital
Cr Share premium

24
Q

What is the double entry for…

Deferred cash

A

Dr Investment in XX

Cr Liability

25
Q

What is the double entry for…

Deferred shares

A

Dr Investment in XX

Cr Other components of equity

26
Q

What is the double entry for…

Contingent deferred cash

A

Dr Investment in XX

Cr Liability

27
Q

What is the double entry for…

Contingent deferred shares

A

Dr Investment in XX
Cr Other components of equity
(shares to be issued in the future
reserve)

28
Q

How do we value deferred cash at fair value?

A

Cash is discounted to present value

29
Q

How do you cancel the profit in PURP?

A

Reduce inventory

Increase cost of sales

30
Q

How do you treat cash and goods in transit?

A

As it they have been received.

31
Q

What kind of influence deems a company to be an associate?

A

Significant influence

32
Q

What are the five things that significant influence can be shown by?

A

▪ Representation on the board of directors
▪ Participation in the policy making processes
▪ Material transactions between the investor and investee
▪ Interchange of managerial personnel
▪ Provision of essential technical information

33
Q

How do you calculate entitled investment in associate?

A

Cost of investment X
Add our share of post acquisition reserves (W5) X
Less: Impairments of associates goodwill (X)

34
Q

What is the double entry when a parent sells to an associate?

A

Dr Group retained earnings

Cr Investment in associate

35
Q

What is the double entry when an associate sells to the parent?

A

Dr Group retained earnings

Cr Group Inventory

36
Q

What is the key factor with joint ventures?

A

No one party (venturer) should be in a position to control the activities.

37
Q

What is a Joint Venture?

A

A Joint venture is a joint arrangement whereby…

  • the parties have joint control of the arrangement and…
  • have rights to the net assets of the arrangement.
38
Q

How do joint ventures account for their investments?

A

Using the equity method

39
Q

What is a Joint Operation?

A

A Joint operation is a joint arrangement whereby…

  • the parties that have joint control of the arrangement
  • have rights to the assets and obligations for the liabilities, relating to the arrangement.
40
Q

What are the four things a joint operator should recognise in relation to its joint operation?

A
  • Its assets
  • Its Liabilities
  • Its revenue from sale of its share of the output
  • Its expenses.
41
Q

In the separate financial statements of a parent company a subsidiary, associate or jointly controlled entity may be accounted for either:

A

▪ At cost; or
▪ In accordance with IFRS9 – Financial instruments (Measured at fair value with gains or losses taken to ‘other comprehensive income (FVTOCI’).

ACCA Financial Reporting (17 decks)

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