EXAM REVISION

Question 1

Define “control”

IFRS10

Answer 1

An investor controls an investee when the investor is “exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee”

Question 2

What are the 4 criteria that must be met for a parent company to not present consolidated financial statements?

Answer 2

• The parent company itself is a wholly owned subsidiary
• The parent is a partially owned subsidiary of another company and all the owners approve that the parent does not present consolidated FS
• Parent shares are not publicly traded (i.e. not a plc)
• The parent’s ultimate parent already presents consolidated FS that comply with IFRS

Question 3

What is an associate?

Answer 3

The entity owns more than 20% of the entity’s share capital but less than 50% of another entity’s share capital

Question 4

When does an entity have significant influence?

Answer 4

The entity’s share ownership is more than 20% and less than 50%

IAS 28 deems that the entity has significant influence

Question 5

What is IAS28 definition of equity accounting

Answer 5

Defined by IAS28 as “a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share capital of post acquisition profits of the investee. The profit or loss of the investor includes its share of the profit or loss of the investee and the other comprehensive income of the investee”