Chapter 12-16

Question 1

what is a step acquisition

Answer 1

several successive share purchases

Question 2

in step acquisition what does control mean

Answer 2

more than 50%`

Question 3

in step acquisition what does significant influence mean

Answer 3

shareholding of 20-49

Question 4

if there is a step acquisition to gain control, how do you account

Answer 4

as if you’ve sold previous investment and add full purchase of sub

Question 5

if there is a step acquisition to retain control, how do you account ( ie gone from 60 - 70 % shareholding)

Answer 5

as if the parent is buying the additional NCI, therefore a decrease of NCI

Calc the NCI up until the control has increased
then x by (% purchased / NCI % Pre acquisition)

Question 6

if there is a step acquisition to a partial disposal how do you calculate if its a sub to associate

Answer 6

as if you’ve sold the sub and purchased an associate

consolidate as sub until disposal
show a profit or loss on disposal
treat as an associate after

Question 7

what is the calculation for group profit or loss on disposal

Answer 7

FV of consideration received + FV of investment retained

less
Net assets at date control lost
GW at date control lost
NCI at date control lost

Question 8

if you’ve had any gains or losses in the OCI before a sub is disposed of, what needs to happen

Answer 8

reclass to P/L

Question 9

what is a deemed disposal

Answer 9

when a sub sells shares and the parent does not take up all of its rights which ends up being a disposal and some control lost for the parent

Question 10

calculation on disposal of associate to investment ie 40% reduced to 10%

Answer 10

FV of consideration + FV of any inv retained

less
cost of associate
share of associates post acquisition reserves
less impairment of investment

Question 11

what is a disposal group

Answer 11

a group of assets to be disposed in a single transaction

Question 12

acronym for criteria for assets to be held for sale

Answer 12

Price at which the asset is held for sale is reasonable in relation to FV
Unlikely that significant changes will be made to the plan to sell
Management must be committed to a plan to sell
Active plan to locate buyer must be initiated
Sale expected to qualify as a completed sale within 1 year

Question 13

steps to present NCA held for sale

Answer 13

1) hold it as carrying amount or revalued amount
2) write it down to fair value less costs to sell if that is less than carrying amount
impairment losses to be charged to P/L
3) NCA held for sale is not to be depreciated
4) any changes in FV - selling costs are treated as an impairment

Question 14

how to treat NCA’s that are being abandoned

Answer 14

it cant be classified as held for sale. remove from PPE and info about the closure could be disclosed

Question 15

definition of a discontinued operation

Answer 15

a component of an entity that has been disposed of or is classified as held for sale and

• represent a separate major line of business or geographical area
• part of a plan to dispose of a separate major line of business or geographical area
• a sub acquired exclusively with a view to resale

Question 16

what is a joint arrangement

Answer 16

two or more parties have joint control

Question 17

what is joint control

Answer 17

contractually agreement of sharing control which exists only when decisions about relevant activies require the unanimous consent of the parties sharing control

Question 18

what is a joint operation

Answer 18

the joint parties have rights to the assets and obligations to the liabilities

Question 19

what is a joint venture

Answer 19

the joint parties have rights to the net assets

Question 20

how do you account for a joint arrangement that is not structured through a separate vehicle

Answer 20

joint operation - line by line accounting

Question 21

how do you account for a joint arrangement that is structured through a separate vehicle

Answer 21

joint venture - equity accounting

Question 22

are adjustments required for joint operations in consolidated accounts

Answer 22

no, the figures are already accounted for in the separate FS

Question 23

what is accounting for joint ventures the same as

Answer 23

accounting for an associate

Question 24

what is IFRS 12

Answer 24

disclosure of interest in other entities

Question 25

what is a structured entity

Answer 25

an entity that has been designed so that voting or similar are not the dominant factor in deciding who controls

Question 26

should you consolidate with a structured entity if you dont own the entity

Answer 26

yes if you control it through other ways

Question 27

what are the two currency concepts

Answer 27

function currency 
presentation currency

Question 28

what is functional currency

Answer 28

the currency you do debits and credits in and you cant choose

Question 29

what is presentation currency

Answer 29

chosen by directors - how they present the FS

Question 30

how to determine the entity’s functional currency

Answer 30

Sales prices 
Competitive forces
Labour material and other costs
Financing activities
receipts from operating activities

(students clearly love financial reporting acronym)

Question 31

how to account for a change in an entity’s functional currency

Answer 31

has to be changed prospectively and using the exchange rate at the date of the change

Question 32

rules for reportig foreign currency in the functional currencuy

Answer 32

1) use the spot rate ( exchange rate at date of transaction)
2) restate monetary assets and liabs at the YE rate if still held at YE
keep non monetary assets at historical costs ( PPE, inventory etc)
3) forex charged to P/L