Topic 1 - CSOFP

Question 1

3 elements which make up control are

Answer 1

1 - power over the investee where the investor has existing rights which give it the current ability to direct activities which significantly affect the investee’s returns.

2 - Exposure or rights to variable returns from involvement in the investee

3 - the ability to use power over the investee to affect the amount of the investor’s returns

Question 2

In accordance with IFRS 3 - business combinations, how many sets of accounts must be prepared if P has control over S?

Answer 2

3 - group accounts are prepared in addition to individual parent and sub sets of accounts

Question 3

Describe PROFORMA W1 in group consolidated accounts

Answer 3

W1 - Group structure.

P   -   80%  (acquired on 01/01/20)
I
I
I
S

Question 4

Describe PROFORMA W2 in group consolidated accounts

Answer 4

Net assets of Sub;

Add;

Equity SC

Other components of equity

Retained earnings

Compare acquisition date to reporting date to give post acquisition profits.

Net assets at acquisition goes into W3 (Goodwill)