Chapter 11

Question 1

When does a group exist?

Answer 1

Where one company controls another company

Question 2

What is power?

Answer 2

Existing rights that give the current ability to direct the relevant activities

Question 3

What is a subsidiary?

Answer 3

An entity controlled by another entity

Question 4

What is IFRS 10?

Answer 4

An investor controls an investee if, and only if, investor has all of the following elements:
Power over investee
Exposure or rights to variable returns from its involvement with investee
Ability to use its power over investee to affect the amount of investors returns

Question 5

According to IFRS 10 what applies to consolidated Financial Statements?

Answer 5

P & S assets and liabilities combined in full
Goodwill recognised in accordance with IFRS 3
SC of group is only parents SC
Intra-group transactions eliminated
Uniform accounting policies must be used
NCI presented within equity

Question 6

What shares do the NCI shareholders own?

Answer 6

Shares in subsidiary that are not owned by the parent entity

Question 7

What are the two methods to calculate NCI at date of acquisition?

Answer 7

Fair value
Proportionate share of net asset method

Question 8

What is goodwill?

Answer 8

Residual amount calculated by comparing value of subsidiary and FV of net assets at this time

Question 9

What is the proportionate share of net assets method?

Answer 9

NCI measured by calculated NCI’s share of FV of subsidiary’s net assets at acquisition. This is added to cost of investment.

Question 10

How is FV of NCI calculated?

Answer 10

Using market value of subsidiaries shares at date of acquisition

Question 11

How do we record impairment loss in FV method?

Answer 11

Reduce goodwill by full amount of impairment loss (CR)
Reduce NCI balance held in equity by the NCI% of impairment loss (DR)
Reduce consolidated retained earnings by P% of impairment loss (DR)

Question 12

How do we record impairment loss using proportionate share of net assets method?

Answer 12

Reduce GW by amount of impairment loss (CR)
Reduce consolidated RE by amount of the impairment loss (DR)

Question 13

When may a residual amount exist?

Answer 13

Positive reputation
Loyal customer base
Staff expertise

Question 14

What is deferred cash consideration?

Answer 14

Cash consideration which will be paid in future
DR Investments
CR Deferred consideration liability

Question 15

What is fair value?

Answer 15

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurements date

Question 16

What is contingent consideration?

Answer 16

Consideration that may be paid in the future if certain events occur or conditions are met

Question 17

What should not be considered as part of consideration paid?

Answer 17

Directly attributable costs of acquisition
Provisions for future leases relating to acquired subsidiary

Question 18

How do we record FV adjustments in the CSFP?

Answer 18

Adjust net assets at acquisition and reporting date
Reflect reporting date adjustment on the face of CSFP

Question 19

What is contingent consideration measured at?

Answer 19

FV

Question 20

When is an asset identifiable?

Answer 20

Capable of being separated
Arises from contractual or other legal rights