Consolidated Financial Statements & IFRS

Question 1

What is a Consolidated Financial Statement?

Answer 1

It is a financial statement of a group where the assets, equity, income, expenses, and cash flows of the parent and its subsidiaries are presented as those of a single economic activity.

Question 2

What is a Subsidiary

Answer 2

A subsidiary is an entity that is controlled by another entity (parent)

Question 3

What is Significant Influence?

Answer 3

It is the power to participate in the financial and operating decisions of an investee but does not amount to control

Question 4

What is IFRS 10 about?

Answer 4

IFRS 10 deals with Consolidated Financial Statements and the definition of control in determining whether an investor should consolidate an investee

Question 5

What are the three elements required for control under IFRS 10

Answer 5

1. Power over the investee
2. Exposure or rights to variable returns.
3. Ability to use power to affect investor’s returns

Question 6

What is IFRS 3 about?

Answer 6

IFRS 3 deals with accounting for business combinations and goodwill.

Question 7

What are the main steps in the acquisition method under IFRS 3?

Answer 7

1. Identify the acquirer
2. Determine the acquisition date
3. Recognise and measure the identifiable net assets acquired
4. Recognise and measure non-controlling interest
5. Recognise goodwill or gain from a bargain purchase.

Question 8

What is Goodwill in a business combination?

Answer 8

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired

Question 9

What happens if there is “Negative Goodwill”?

Answer 9

Negative goodwill arises when the fair value of net assets exceeds the purchase price, and it is recognised as income in the P&L

Question 10

How are intra-group balances handled in consolidated financial statements?

Answer 10

Intra-group balances, such as loans or transactions between group companies, are eliminated in full to avoid double-counting.