Consolidation Standards

Question 1

What legislation deals with consolidations directly? and what are their headings?

Answer 1

IFRS 3: business combinations
IFRS 10: Consolidated financial statements
IFRS 11: Joint arrangements
IFRS 12: Disclosure of interests in other entities
IAS 27: separate financial statements
IAS 28: Associates and Joint Ventures

Question 2

What is the point of IFRS 10?

Answer 2

establish principles for the presentation and preparation of financial statements when an entity controls one or more entities

Question 3

What does it mean to have control over an entity?

Answer 3

• the investor controls the investee when
• the investor is exposed or has the rights to, variable returns from its involvement with the investee and this is proven when the following is met
  > returns from involvement have the potential to vary as a result of investee’s performance
  > returns can be positive, negative or both
  > one investor can control while multiple share in the returns
  AND
• has the ability to affect those returns, adn to do that means the following must be met > there must be a link between power and returns
  > principal vs agent (idk what that means)
• through its power over the investee, and they have that power when the following is met
  > existing rights that give the current ability to direct the relevant activities
  > power arises from substantive rights, which means
  ~ excercisable on decisions about direction of relevant activities
  ~ must have a practical ability to excerise rights
  > protective rights are not taken into account
  ~ those are any rights that are designed to protect interest without giving power over entity (right of lender to ceize assets on default

Question 4

What guidance does the standard give us on assessing if we have control over the entity?

Answer 4

look at appendix B

Question 5

What are the possible degrees of control and what accounting methods do they require?

Answer 5

• control
• consolidate
• joint control
• depends
• significant influence
• equity method
• less than significant influence
• IFRS 9

Question 6

what is the objective for IFRS 11?

Answer 6

establish principles for financial reporting by entities with interests in jointly controlled arrangements

Question 7

What is a Joint arrangment?

Answer 7

• when two or more parties have joint control, which means
• contractually agreed sharing of control
• decisions about relevant activities require unanimous conscent
• IFRS 10 control which means

Question 8

What types of Joint arrangments are there?

Answer 8

• Joint operation
• parties that have joint control over the arrangement, have rights to the net assets of the arrangement
• requires equity accounting
• governed by IAS 28
• Joint Venture
• parties have joint control over the arrangement and have rights to the assets and obligations for the liabilities
• requires some form of accounting (I think it requires the fully consolidate method)

Question 9

What is the objective of IFRS 12?

Answer 9

• to require the disclosure of information to enable users to evaluate
• nature and risks associated with interests in other entities
• effect of interests on
  > financial position
  > financial performance
  > cash flows

Question 10

What is the objective of IAS 27?

Answer 10

sets the standards for accounting for the follwing in the separate financial statements
* subs
* Joint ventures
* associates

Question 11

What accounting methods does IAS 27 allow us to use to account for our investments in other companies in seperate financial statements and consolidated financial statements?

Answer 11

Consolidated financial statements
- equity method
- elimination method?

Separate financial statements
- cost
- IFRS 9

Question 12

What is the objective of IAS 28?

Answer 12

look it up Karen