Yleistä

Question 1

Consolidated companies

Answer 1

Consolidated companies include those where the Group has power over, i.e. when Group has rights to direct the relevant activities that significantly affect the other party’s returns.

Question 2

Associated companies

Answer 2

= Osakkuusyhtiöt

Associated companies are undertakings where the Group has significant influence, holding between 20% and 50% of the voting rights, but which it does not control.

Question 3

Statutory accounts

Answer 3

Accounts prepared in compliance with applicable local statutory law (local GAAP) are called statutory accounts.

Question 4

GAAP

Answer 4

GAAP = Generally Accepted Accounting Principles

Are accounting regulations imposed by local statutory laws and regulations. IFRS standards shall be applied to company statutory accounts whenever they do not conflict with national regulations.

Question 5

In accordance with IAS 1.10, a complete set of Group IFRS Accounts includes the following components:

Answer 5

• Consolidated Statement of Financial Position (BS - formerly balance sheet)
• Consolidated Income Statement (P&L, PL – formerly profit or loss statement)
• Consolidated Statement of Comprehensive Income
• Consolidated Statement of Cash Flows
• Consolidated Statement of Changes in Equity
• Notes to the Consolidated Financial Statements, including significant accounting principles and other explanatory information

Question 6

Flash report

Answer 6

A flash report is a summary of the key operational and financial outcomes of a business. It is typically provided by the accounting department to the management team on a frequent basis, perhaps daily or weekly.

Question 7

Mitä on in the scope of (our) consolidated financial statements?

Answer 7

Entities:
1. we have control: SUBSIDIARY (yli 50%)
2. we have joint control: JOINT ARRANGEMENTS (50%)
3. we exercise significant influence: ASSOCIATE COMPANIES (20-49,9%)

JA A S!

Question 8

Whether an entity has control over another entity, exercises joint control or has significant influence over another entity determines how an entity is accounted for:

Answer 8

• Control alone = account for as subsidiary (usually ownership > 50%),
• Joint control = account for as joint arrangement (joint venture or joint operation)(usually ownership 50%),
• Significant influence = account for as an associate (usually ownership 20-50%)
• Financial investment = account for as financial instrument (usually ownership <20%)

Each arrangement is either controlled alone (in scope of IFRS 10), jointly controlled (in scope of IFRS 11) or outside the scope of IFRS 10 or IFRS 11 - these can be e.g. investment entities accounted for under IAS 28 or a financial instruments accounted for under IFRS 9 Financial Instruments.

Question 9

According to IFRS 10, investor entity controls an investee only if the investor has all of WHAT elements?

Answer 9

A. POWER over the investee including the ability to direct relevant activities
B. EXPOSURE to variable returns from the investee
C. Ability to use its power to AFFECT the amount of the investor’s RETURNS

PEAR

Question 10

What is a Subsidiary according to IFRS 10?

Answer 10

= tytäryhtiö

Subsidiary = is an entity that is controlled by another entity and control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. (including an unincorporated entity such as a partnership)

An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee.

Question 11

What is Joint control according to IFRS 11?

Answer 11

= yhteinen määräysvalta

Joint control = is a contractually agreed sharing of control over an economic activity, meaning two parties have joint control through a contractual agreement.

It exists only when the strategic financial and operating decisions require unanimous consent of the controlling parties. Joint control means that no party to the agreement is entitled to act unilaterally to control the activity of the entity. The parties to the agreement must act together to control the entity and therefore exercise joint control.

Usually joint arrangement exists when investors have 50% ownership in the investee. Guidance is included in IFRS 11 Joint Arrangements standard.

Question 12

Joint arrangements are classified as either joint operations or joint ventures? What are joint ventures?

Answer 12

= yhteisyritykset

Joint ventures = are joint arrangements, whereby the partners who have joint control of the arrangement have rights to the net assets of the joint arrangement.

These are accounted using the equity method and joint operations consolidated using line-by-line method. (meil eij)

Question 13

Joint arrangements are classified as either joint operations or joint ventures? What are joint operations?

Answer 13

Joint operations = are joint arrangements, whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

In relation to its interest in joint operations, the Group recognises its share of assets, liabilities, revenues, expenses and cash flows of the joint operation. The share is determined based on rights to the assets and obligations for the liabilities of each joint operator. (meil dos)

Question 14

Mikä ero Joint ventures vs Joint operations?

Answer 14

When an entity has rights to the ASSETS, and OBLIGATIONS FOR THE LIABILITIES, relating to the arrangement, the arrangement is a joint operation.

When an entity has rights to the NET ASSETS of the arrangement, the arrangement is a joint venture.

Question 15

Associate companies definition by IAS 28?

Answer 15

IAS 28 standard defines an associate as a company in which the investor has significant influence, but which is neither a subsidiary (control) nor a joint arrangement (joint control) to the investor.

Usually companies where investors have 20-50% ownership are considered as associate companies, with maximum ownership for associates being usually below 50%, since 50% owned companies are normally considered as joint arrangements.

Question 16

How is significant influence defined by IAS 28?

Answer 16

Significant influence is defined as having the CAPACITY, ABILITY or the POWER to participate in the financial and operating policy decisions of the investor, but not control over those policies.

CAP

Significant influence is presumed to exist when the investor holds at least 20% of the investee’s voting power, but not to exist when less than 20% is held; both of these presumptions may be rebutted if there is clear evidence to the contrary.

Question 17

How are associated companies accounted for?

Answer 17

Associated companies are accounted for using the EQUITY METHOD, which involves recognising in the income statement the Group’s share of the associate’s profit or loss for the year (less any impaired goodwill).

The Group’s interest in the associated company is carried in the statement of Financial Position at an amount that reflects its share of the net assets of the associate together with goodwill on acquisition (if any).

Question 18

LUE:

Elimination of inter-group items and resulting unrealised profits: consolidation

Answer 18

• Inter-group balances and transactions disclosed in the income statement and balance sheet including sales, operative expenses, financial income and expenses, other operating income and expenses, receivables and liabilities, internal dividends as well as group contributions and other non-operative items, are eliminated in full at consolidation. Eliminations of these transactions and balances are handled automatically in the reporting tool.
• Unrealised profits resulting from inter-group transactions that are included in the carrying amount of assets, such as inventory, fixed assets and shares, are eliminated in full.
• Unrealised losses resulting from inter-group transactions that are deducted in arriving at the carrying amount of assets are also eliminated unless cost can be recovered.
• The inter-group dividends are eliminated by the reporting tool equity rules subgroup by subgroup. Also the group contributions are eliminated automatically by the reporting tool.

Question 19

Disclosure of non-controlling interests: consolidation

Answer 19

= määräysvallattomien omistajien osuus

Non-controlling interests are presented as a separate component within the equity of the Group in the consolidated statement of financial position. The proportionate share of P&L attributable to non-controlling interests and to owners of the parent company are presented in the consolidated income statement after the profit for the period.

The losses applicable to the minority in a consolidated subsidiary may exceed the noncontrolling interest in the equity of the subsidiary. The excess, and any further losses applicable to the minority, is charged against the majority interest except to the extent that the minority has a binding obligation to, and is able to, support the losses. If the subsidiary subsequently reports profits, the majority interest is allocated all such profits until the minority’s share of losses previously absorbed by the majority has been recovered. This means that the losses are allocated to NCI even if this results in NCI having a negative balance.

Question 20

Goodwill?

Answer 20

= eli liikearvo

Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognised by the Group on an acquisition.

In preparing a balance sheet as at the date of acquisition, the acquirer’s interest in the individual assets and liabilities acquired are recorded at their fair value. The difference between the net amount of such assets and liabilities and the cost of the acquisition is accounted for as goodwill or negative goodwill.
->Transaction costs related to acquisition are expensed as incurred and not impacting the amount of goodwill.

Goodwill is the excess of:
- the fair value of the cost of a business combination (consideration transferred)
- the amount of any non-controlling interest
- the acquisition date fair value of the acquirers previously held equity interest in the acquiree (in acquisition achieved in stages)

Eli se on future economic benefits

Question 21

Goodwill impairment testing?

Answer 21

Goodwill is not amortised, but tested for impairment on an annual basis! (tai useammin, jos on merkkejä impairmentista).

Goodwill arises on consolidation and does not generate cash flows independently of other assets and is therefore allocated to cash-generating units (CGUs) or groups of CGUs for impairment testing and to account for subsequent disposals (would be considered as part of disposed net assets per the allocation).

Goodwill is allocated on a rational basis to the lowest level at which it is monitored by management. Goodwill is allocated to all CGUs expected to benefit from the business combination including those to which acquired assets have not been allocated. Goodwill needs to be pushed down to such a level to ensure goodwill is being recorded in the correct currency.

Question 22

Negative goodwill?

Answer 22

Most acquisitions give rise to positive goodwill.

However, occasionally the fair value of the net assets acquired may exceed the acquisition cost (negative goodwill, bargain purchase).

When this occurs, the identification and measurement of acquired assets, liabilities and contingent liabilities is reperformed. Any excess that remains is recognised immediately in the income statement.