1. As
prescribed in AASB 3 Business Combinations, when an acquirer makes a bargain
purchase, the acquirer recognises the excess as goodwill on acquisition
date.
Chapter – Chapter 27 #1
Difficulty: Easy
Section: 27.06 Accounting for business combinations
2. When an
acquirer makes a bargain purchase in a business combination, the excess that
remains is recognised in profit or loss of the acquirer on acquisition date.
Chapter – Chapter 27 #2
Difficulty: Easy
Section: 27.06 Accounting for business combinations
3. Goodwill
arises at acquisition date when the purchase price exceeds the identifiable
assets acquired and the liabilities assumed.
Chapter – Chapter 27 #3
Difficulty: Easy
Section: 27.06 Accounting for business combinations
4. Where
separate entities in a group do not apply the same accounting methods, AASB 10
Consolidated Financial Statements prescribes adjustments to be made on
consolidation to remove the effects of different accounting policies.
Chapter – Chapter 27 #4
Difficulty: Medium
Section: 27.06 Accounting for business combinations
5. AASB 10
Consolidated Financial Statements permits the reporting periods of entities in
the group to be dissimilar as long as adjustments are made on consolidation to
remove the effects of different reporting periods.
Chapter – Chapter 27 #5
Difficulty: Easy
Section: 27.06 Accounting for business combinations
6. The first
step in the consolidation process is substituting the assets and liabilities of
the subsidiary for the investment account that currently exists in the parent
company.
Chapter – Chapter 27 #6
Difficulty: Easy
Section: 27.06 Accounting for business combinations
7. The
purpose of providing consolidated statements is to show the results and
financial position of a group as if it were operating with a single source of
finance.
Chapter – Chapter 27 #7
Difficulty: Easy
Section: 27.01 Rationale for consolidating the financial
statements of different legal entities
Section: Introduction to accounting for group structures
8. In the
consolidated financial statements of the parent entity and its controlled
entities only transactions with assets and liabilities relating to parties
external to the economic entity will be reflected.
Chapter – Chapter 27 #8
Difficulty: Easy
Section: 27.03 Alternative consolidation concepts
9. Sullivan
(1985) argued that the preparation of group accounts can proceed to the
fulfilment of the true and fair notion only when partitioning is fully
enforced.
Chapter – Chapter 27 #9
Difficulty: Medium
Section: 27.02 History of Australian Accounting Standards
that govern the preparation of consolidated financial statements
10. Under AASB
10 parent companies may choose whether to present one set of consolidated
accounts or to provide two or more sub-sets of the consolidated accounts to
cover the whole group.
Chapter – Chapter 27 #10
Difficulty: Easy
Section: 27.02 History of Australian Accounting Standards
that govern the preparation of consolidated financial statements
11. A
subsidiary is an entity that is controlled by a parent entity.
Chapter – Chapter 27 #11
Difficulty: Easy
Section: 27.02 History of Australian Accounting Standards
that govern the preparation of consolidated financial statements
Section: Introduction to accounting for group structures
12. The
consolidation concept adopted in AASB 10 is to include all the assets and
liabilities of the parent entity and subsidiaries in the consolidation and to
treat non-controlling interests as part of the equity of the group.
Chapter – Chapter 27 #12
Difficulty: Easy
Section: 27.03 Alternative consolidation concepts
13. Non-controlling
interests (minority interests) are defined as the equity in the parent company
that is not provided by the group shareholders.
Chapter – Chapter 27 #13
Difficulty: Easy
Section: 27.03 Alternative consolidation concepts
14. AASB 10
requires the parent company to have control of another entity in order for that
entity’s consolidation into the group accounts to be required.
Chapter – Chapter 27 #14
Difficulty: Easy
Section: 27.01 Rationale for consolidating the financial
statements of different legal entities
15. It is
possible for one entity to control another entity under the AASB 10 definition
without the controlling entity having any equity-ownership interest in the
other entity.
Chapter – Chapter 27 #15
Difficulty: Medium
Section: 27.04 The concept of control
16. A company
may own more than 50 per cent of the capital of another entity and not have
effective control of that entity as defined in AASB 10.
Chapter – Chapter 27 #16
Difficulty: Easy
Section: 27.04 The concept of control
17. Control is
defined in AASB 10 as the ‘capacity to manage the policies of another entity’.
Chapter – Chapter 27 #17
Difficulty: Easy
Section: 27.04 The concept of control
18. The
consolidation process does not involve any adjustments to the financial statements
of the individual entities making up the group.
Chapter – Chapter 27 #18
Difficulty: Easy
Section: 27.06 Accounting for business combinations
19. AASB 10
notes that in preparing consolidated financial statements, an entity combines
the financial statements of the parent and the subsidiaries line by line by
adding together, in proportion to the degree of ownership, like items of
assets, liabilities, income and expenses; but not equity balances.
Chapter – Chapter 27 #19
Difficulty: Easy
Section: 27.01 Rationale for consolidating the financial
statements of different legal entities
20. ‘Control’
over a subsidiary, once determined as being in existence, can only be lost with
a change in the level of ownership.
Chapter – Chapter 27 #20
Difficulty: Medium
Section: 27.04 The concept of control
21. ‘Passive’
control implies that it is possible to exert control over another entity even
though the option to exert such control may never be exercised.
Chapter – Chapter 27 #21
Difficulty: Easy
Section: 27.04 The concept of control
22. Post-acquisition
earnings of the subsidiary are included in the economic entity’s earnings.
Chapter – Chapter 27 #22
Difficulty: Easy
Section: 27.10 Consolidation after date of acquisition
23. The degree
of control over an investee determines how the investor accounts for the
investment.
Chapter – Chapter 27 #23
Difficulty: Easy
Section: 27.11 Disclosure requirements
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