ACCA FR
ACCA Financial Reporting (FR) Flashcards
What are the two fundamental qualitative characteristics contained within the IASB Conceptual Framework?
What are the four enhancing qualitative characteristics within the IASB Conceptual Framework?
What are the perceived advantages of the standardisation of accounting practices?
What are the perceived disadvantages of the standardisation of accounting practices?
Where an investor holds shares in another company representing greater than 50% of the voting rights in a general meeting of that other company, the investor must always incorporate the results of the investee company in a set of group financial statements. Is the following statement true?
If a liquidator has been appointed to the subsidiary, this represents a loss of control and therefore the statement of financial position of the subsidiary is not included within the consolidated financial statements. Is this statement true?
If a lender has, within the loan agreement, the right to appoint a majority of the board of directors of a subsidiary, this represents a loss of control and therefore the statement of financial position of the subsidiary is not included within the consolidated financial statements. Is this statement true?
If a foreign government imposes severe restrictions on an overseas subsidiary, this represents a loss of control and therefore the statement of financial position of the subsidiary is not included within the consolidated financial statements. Is the following statement true?
When a company holds 35% of another company's shares and voting rights, then the investee will always be treated as an associate company using equity accounting principles. Is this statement true?
"When a company holds 35% of another company's shares and voting rights and the remaining 65% are spread over a large number of small investors, then the investee will always be treated as an associate company using equity accounting principles." Is this statement true?
What is the extent of an investor's influence when the investor holds > 20% but < 50% of the voting power of another company?
When must an entity prepare consolidated financial statements?
When is an investee classed as an associate?
What is the definition of “control of an investee”?
What is a non-controlling interest?
What is the Framework definition of an Asset?
What is the Framework definition of a Liability?
What is the Framework definition of Equity?
What is the definition of a lease?
What three characteristics are required to faithfully represent a transaction?
What is the underlying assumption for the preparation of financial statements as per The Conceptual Framework?
Define the term “financial asset”.
A company changes an accounting policy. How is the change accounted for, and why does that treatment protect comparability?
A company revises the estimated useful life of its plant from ten years to six. How is that accounted for, and what does it do to the comparability of the trend?
Why is a material prior period error corrected by restating the comparatives rather than by putting the adjustment through the current year's profit?
Under the 2018 Conceptual Framework, what test must be met before an asset or a liability is recognised?
If probability and measurement reliability are no longer separate recognition hurdles, how do they still affect whether an item is recognised?
How does the Conceptual Framework define income and expenses?
When is an asset derecognised, and when is a liability derecognised?
What are the two measurement categories in the Conceptual Framework, and what does each one measure?
How do value in use and fulfilment value differ from fair value?
A machine was bought two years ago for $80,000 and is depreciated straight line over ten years with no residual value. An identical new machine would cost $100,000 today. What is its carrying amount on a historical cost basis and on a current cost basis?
What is the main advantage of historical cost measurement, and why does it flatter ROCE when prices are rising?
Does measuring assets at current value solve the problems of historical cost?
What is a conceptual framework, and what is the IASB's Conceptual Framework used for?
If a requirement in an IFRS Accounting Standard conflicts with the Conceptual Framework, which one prevails?
What is the objective of general purpose financial reporting?
Who are the primary users of general purpose financial statements, and why are an entity's own managers and its tax authority not among them?
What is a 'reporting entity' under the Conceptual Framework?
How does IFRS 13 define fair value, and why is it described as an exit price?
What are the three levels of the IFRS 13 fair value hierarchy, and which must be used where it is available?
A company owns a site it uses as a warehouse, but market participants would redevelop it as housing, which is worth considerably more. On what basis is its fair value measured?
What does the single economic entity concept mean for the way a 60%-owned subsidiary appears in the consolidated statement of financial position?
Why does the parent's 'investment in subsidiary' asset not appear in the consolidated statement of financial position?
What is the objective of preparing consolidated financial statements, and what limitation of the parent's own statements do they overcome?
When is a parent exempt from preparing consolidated financial statements?
A subsidiary has a 30 September year end and uses a different inventory cost formula from its parent, whose year end is 31 December. What must be done before consolidating?
Why must intra-group balances, intra-group trading and unrealised profit on goods still held within the group be eliminated on consolidation?
Why are both the consideration transferred and the subsidiary's identifiable net assets measured at fair value at the acquisition date?
What does the goodwill recognised on an acquisition actually represent?
What are the three characteristics of a perfectly faithful representation, and what does 'free from error' actually require?
How does prudence support neutrality, and what does prudence not permit?
A company sells inventory to a bank and is committed to buy it back in a year at a price that covers the bank's finance cost. Why would recognising revenue on the sale not be a faithful representation?
What is the ISSB, and how does it relate to the IASB?
What is the purpose of the ISSB, and do its standards form part of the financial statements?
How is the IFRS Foundation structured, and which body produces each type of standard?
What are the main stages the IASB works through in issuing a new IFRS Accounting Standard?
How do national standard setters relate to the IASB, and why can the IASB not simply impose its standards on an entity?
What does it mean to say that IFRS Accounting Standards are principles-based, and what is the advantage?
What is the drawback of a rules-based approach, and can the two approaches be complementary?
Why are IFRS Accounting Standards alone not a complete regulatory framework for financial reporting?
What three elements must all be present before one entity controls another under IFRS 10?
A company holds 45% of another company's shares plus options over a further 10% that are exercisable now, and the remaining shares are spread among many small holders. Is the investee a subsidiary?
An overseas subsidiary is subject to strict currency controls that prevent it remitting any cash to its parent. Must it now be excluded from consolidation?
What is significant influence, and what evidence points to it?
Why is an associate equity accounted rather than consolidated line by line?
Inventory is valued at the lower of which two amounts?
Do we depreciate the Land and Buildings category?
What is a contingent asset?
How is a contingent asset treated in the Financial Statements if the likelihood of the asset being confirmed is regarded as probable?
According to IAS 38 – Intangible assets – how should research be treated in the financial statements?
Change in accounting estimate (1)
Change in accounting policy (1)
When is a change in an accounting policy permitted?
A discontinued operation (not having been classed as an asset held for sale) is one which is being disposed of. Is this statement true?
What is the definition of a Provision?
What is the definition of a Contingent Liability?
What is the appropriate treatment in the current year's Financial Statements when an entity changes an accounting policy?
What is the appropriate treatment in the current year's Financial Statements when an entity discovers a fundamental error which, if detected last year, would have caused the previous year's reported figures to be different?
What is the appropriate accounting treatment when an entity revises its assessment of the remaining useful life of an asset?
What is the appropriate accounting treatment when subsequent expenditure on property, plant and equipment is incurred?
There are two alternative methods of accounting for the receipt of a government grant received in respect of an asset. What are these two ways?
What is the appropriate treatment of borrowing costs incurred on a qualifying loan?
In the context of borrowing costs, what are the situations when borrowing costs should cease to be capitalised?
What is the definition of “Investment Property”?
What are the two alternative accounting treatments for investment properties?
Where an investment property is held under the fair value model, what is the appropriate treatment for this asset?
What are the two methods of measuring the value of an intangible asset?
In the context of intangible assets, what is the difference between an asset with an “infinite life” and an asset with an “indefinite life”?
In the context of goodwill, what is the appropriate treatment for goodwill which has been internally generated?
What is the definition of “development expenditure”?
When considering whether an asset needs to be impaired, the carrying value should be compared with what other value?
In the context of asset impairments, of what is “CGU” the abbreviation?
In the context of asset impairments, what is the definition of a cash generating unit?
In the context of asset impairments, what is the limit below which an asset should not be impaired?
What is the appropriate accounting treatment for an asset which has been classified as a “non-current asset held for sale”?
Before it may be classified as an asset held for sale, certain conditions must apply. What are those conditions?
What is the appropriate accounting treatment for a short-life, leased asset?
At what value should a lease liability be measured?
An entity enters into a contract to pay rentals for the use of a short-life asset with a fair value of $10,000, 4 months into the accounting period.
In the context of financial instruments, what is the definition of a compound instrument?
Details of a contract in its first year are as follows: contract value $2,000,000; costs to date $1,250,000; 60% complete; amounts invoiced $1,150,000; amounts received $1,100,000; estimated costs to complete $850,000. Revenue is recognised over time and on the basis of percentage complete. What is the value of costs to be recognised?
What is a “constructive obligation” of an entity?
What is an onerous contract?
What is the definition of “events after the reporting period”?
What is the definition of an “adjusting event”?
What is the definition of a “non-adjusting event”?
What is the correct double entry to reflect a non-adjusting event?
What is the appropriate accounting treatment for an adjusting event?
Define Functional Currency.
Should you depreciate PPE and investment properties if held at FV?
What are the five stages of the revenue recognition model?
How should a company account for a government grant?
How is the initial liability calculated in a convertible debt instrument?
How are financial assets classified?
How are financial assets initially measured?
How are financial liabilities initially measured?
When can an entity measure a financial asset using amortised cost?
Foreign currency (1)
What exchange rate is used to translate monetary assets/liabilities at the reporting date?
What is a biological asset?
How are biological assets measured?
What figure is shown under current liabilities for tax payable on the statement of financial position?
How is the income tax expense figure calculated on the statement of profit or loss?
When is a deferred tax liability recognised?
Over what period of time should a right-of-use asset be depreciated?
How is a lease incentive accounted for within the financial statements?
How are fixed overheads allocated to the cost of an item of inventory?
How are variable overheads allocated to an item of inventory?
Where is the taxation on the revaluation of PPE recognised?
Foreign currency (3)
Under IAS 8, how do you tell a change in accounting policy apart from a change in accounting estimate?
A company adopts the revaluation model for its properties for the first time, having previously used the cost model. Is that a change of accounting policy, and are the comparatives restated?
How does an entity decide whether it is acting as principal or as agent under IFRS 15, and what does each recognise as revenue?
An entity sells an asset for cash and at the same time takes out a call option to buy it back in two years at a higher price. Can it recognise revenue?
What conditions must be met before revenue can be recognised on a bill-and-hold sale, where the seller still physically holds goods the customer has bought?
A manufacturer delivers goods to a dealer on consignment. When does the manufacturer recognise revenue?
When is a performance obligation satisfied over time rather than at a point in time?
What is the difference between an output method and an input method of measuring progress towards satisfying a performance obligation?
A contract with a transaction price of $2m and total expected costs of $1.5m is 40% complete at the year end, having been 15% complete a year ago. What revenue and cost of sales are recognised this year?
What is the difference between a contract asset and a receivable under IFRS 15?
An entity has recognised revenue of $700,000 to date on a contract and has invoiced the customer $900,000. What is reported in the statement of financial position?
How is the transaction price allocated between the performance obligations in a bundled contract?
A machine is sold for $50,000 including three years' servicing. Sold separately the machine costs $44,000 and the servicing $11,000. How much revenue is recognised when the machine is delivered?
A bundle of goods and services is sold for less than the total of their standalone selling prices. To which performance obligations is the discount allocated?
How is variable consideration, such as a completion bonus or a volume rebate, brought into the transaction price?
Goods with a cash selling price of $100,000 are sold on two years' interest-free credit for $121,000. How much revenue is recognised, and how is the balance treated?
Which costs of obtaining and of fulfilling a contract with a customer are capitalised as an asset under IFRS 15?
How do you decide whether a warranty is a separate performance obligation under IFRS 15 or a provision under IAS 37?
A lease liability of $100,000 bears interest at 8% and the annual payment of $25,000 is made at the end of each year. What is the liability at the end of year 1?
How does the lease liability working change when the lease payments are made in advance instead of in arrears?
How is a lease liability split between current and non-current liabilities in the statement of financial position?
What is included in the initial cost of a right-of-use asset under IFRS 16?
Which leases may a lessee choose to keep off the statement of financial position under IFRS 16, and how are they then accounted for?
How is the 'low value' condition in IFRS 16 assessed, and at what level is each recognition exemption elected?
In a sale and leaseback that qualifies as a sale, at what amount does the seller-lessee measure the right-of-use asset it retains?
An asset with a carrying amount of $800,000 and a fair value of $1,000,000 is sold for $1,000,000 and leased back, the lease liability being $600,000. What right-of-use asset and what gain are recognised?
What is a discontinued operation under IFRS 5?
How is a discontinued operation presented in the statement of profit or loss?
An operation is discontinued during the current year. What happens to the prior-year comparative figures?
When may the fair value gains and losses on an equity investment be presented in other comprehensive income under IFRS 9?
An equity investment held at fair value through other comprehensive income is sold at a profit. What happens to the cumulative gain sitting in other comprehensive income, and how were the dividends treated?
Which debt instruments are measured at fair value through other comprehensive income under IFRS 9?
Which two tests must a financial asset pass to be measured at amortised cost under IFRS 9?
A loan note is issued for $9,000,000 after issue costs, has a nominal value of $10,000,000 carrying a 5% coupon, and an effective interest rate of 8%. What is the year 1 finance cost and the closing carrying amount?
At what amount is a financial liability that will be held at amortised cost measured on initial recognition?
How are redeemable preference shares, and the dividends paid on them, presented in the issuer's financial statements?
How are irredeemable preference shares carrying a discretionary dividend classified, and where does the dividend appear?
How is the equity component of convertible debt measured on issue?
Convertible loan notes are issued for $10,000,000 and the present value of the interest and redemption payments, discounted at the rate for similar non-convertible debt, is $8,700,000. What is recorded, and where does each component sit?
A company factors its receivables but must reimburse the factor for anything the factor fails to collect. How is the arrangement accounted for?
A company sells its receivables to a factor for a single non-refundable payment, with no recourse for irrecoverable amounts. How is this accounted for?
What is the objective of IFRS S1?
What four elements of core content must an entity report on under IFRS S1?
How often must goodwill acquired in a business combination be tested for impairment?
To which cash-generating units is acquired goodwill allocated, and why is the allocation necessary?
A company's directors declare a final dividend three weeks after the reporting date but before the financial statements are authorised for issue. How is it treated?
After the reporting date, management concludes it has no realistic alternative but to cease trading and liquidate the company. What must the financial statements not do?
What distinguishes a taxable temporary difference from a deductible temporary difference, and which deferred tax balance does each create?
When may a deferred tax asset be recognised?
Which temporary differences arise most often in FR questions, and in which direction does each go?
Which tax rate is used to measure deferred tax?
The deferred tax liability rises from $400,000 to $550,000, and $60,000 of that increase relates to a property revaluation recognised in other comprehensive income. What is charged to profit or loss?
What makes up the initial cost of an item of property, plant and equipment?
A company has included staff training, a share of head office overheads, an advertising launch campaign and abnormal wastage in the cost of a machine it built itself. Which of these may be capitalised?
Expenditure on an existing machine extends its remaining useful life by four years. Is it capitalised or expensed?
Where is a gain on revaluing property, plant and equipment recognised?
A building carried at a revalued amount falls in value by $500,000. Its revaluation surplus stands at $200,000. How is the fall recorded?
A company wants to revalue its two most valuable properties and leave the rest of its properties at cost. Is that permitted?
How is depreciation calculated in the year after an asset has been revalued?
What is the annual transfer of excess depreciation from the revaluation surplus, and where is it presented?
A revalued asset is sold. How is the gain or loss on disposal calculated, and what happens to the balance on its revaluation surplus?
When may a government grant first be recognised?
How is a grant towards revenue expenditure recognised and presented?
A government grant becomes repayable. How is the repayment accounted for?
What is the difference between an entity's functional currency and its presentation currency?
At what rate is a foreign currency transaction first recorded?
A foreign currency payable is settled later in the same accounting period at a different exchange rate from the one used to record it. Where does the difference go?
At the reporting date, which foreign currency balances are retranslated and which are not?
What is a qualifying asset, and when must capitalisation of borrowing costs begin?
A company borrows $6m specifically at 8% to build a factory, and construction runs for the whole year. Surplus loan funds on deposit earn $40,000 during the year. How much is capitalised?
How much is capitalised where a qualifying asset is funded out of general borrowings?
Which costs are included in the cost of inventory, and which must be excluded?
Product A cost $50 and has a net realisable value of $60; product B cost $40 and has a net realisable value of $25. At what total amount is inventory stated?
Which cost formulas may be used to measure inventory?
How does a bonus issue affect the weighted average number of shares used for EPS?
A company with a 31 December year end issues 2 million shares at full market price on 1 October. How are they treated in the EPS calculation?
A company with 4 million shares makes a 1 for 4 rights issue at $2.00 on 1 July, when the shares stand at $3.00 cum rights. How is the weighted average number of shares adjusted?
How is diluted EPS calculated where a company has convertible loan notes in issue?
A company has 1 million shares under option at an exercise price of $1.50 when the average market price for the year is $2.00. How many extra shares enter the diluted EPS calculation?
In what order is an impairment loss allocated across the assets of a cash-generating unit?
When allocating an impairment loss across a cash-generating unit, is there a limit on how far an individual asset may be written down?
Conditions improve and an asset impaired two years ago recovers its value. How much of the loss may be reversed, and does the same apply to goodwill?
Give the external and internal indicators that an asset may be impaired.
A property carried at a revalued amount becomes impaired. Where is the impairment loss recognised?
How is value in use measured?
What three conditions must all be met before a provision is recognised?
May a company provide for expected operating losses for next year, the cost of overhauling its own plant, or staff retraining under a planned reorganisation?
A manufacturer gives a one-year warranty on thousands of identical products. How is the warranty provision measured?
An oil company must dismantle a rig in 20 years, at a cost with a present value of $8m. What is recorded now, and what happens in each later year?
When may a restructuring provision be recognised, and what costs may it include?
Set out the treatment of a possible outflow and of a possible inflow at each level of probability.
What conditions must be met before development expenditure is capitalised?
A project meets every development capitalisation criterion. May the company still choose to write the expenditure off?
Development costs on a project were expensed in 20X4 because the criteria were not met, and the criteria are met in 20X5. May the 20X4 costs now be capitalised?
When does amortisation of capitalised development costs begin?
What follows from concluding that an intangible asset has an indefinite useful life?
When may an intangible asset be carried under the revaluation model?
A company acquires a subsidiary that owns a well-known brand and a customer list, neither of which the subsidiary had ever recognised. How are they treated on acquisition?
How is a transfer between owner-occupied property and investment property measured at the date of the change of use?
A company measures its investment property under the cost model. What are the consequences?
A parent rents a building to its subsidiary. How is that building classified?
Where is the gain on remeasuring a dairy herd to fair value less costs to sell recognised?
At what amount does harvested produce enter inventory, and which standard applies to it after harvest?
Grape vines bear fruit year after year. Which standard applies to the vines, and which to the grapes growing on them?
Classify each of these: switching inventory costing from FIFO to weighted average; changing the depreciation method; revising a useful life; moving from the cost model to the revaluation model.
A material error in the prior year's financial statements is discovered this year. How is it corrected?
In a diluted earnings per share question with both options and convertible loan stock, the calculated earnings per share after the options had been projected to be taken up was 57 cents per share. After the loan conversion, the earnings per share figure was 57.2 cents per share. What figure for diluted earnings per share will be disclosed in the financial statements?
What is the full title of the abbreviation “P/E ratio”?
Having calculated an entity's ROCE at 13%, what question does this answer?
How is the asset turnover multiple calculated?
How is the quick ratio (acid test) calculated?
Suggest some reasons why the calculated “days' sales in receivables” has increased from 45 days last year to 52 days this year
When an entity has an “interest cover” multiple of 4.5x, would you conclude that the entity is in a strong position?
What is the basis of the calculation for “dividend yield”?
What is meant by the term “window dressing”?
What is the formula for EPS?
What are the limitations of financial statements?
How is return on capital employed (ROCE) calculated, and what does it measure?
A company's ROCE has fallen from 15% to 11%. How do you break that fall down to identify the cause?
How is gross profit margin calculated, and what causes it to move?
How is operating profit margin calculated, and what does comparing it with gross margin tell you?
How is return on equity (ROE) calculated, and why can it move in the opposite direction to ROCE?
What are the two ways of calculating gearing, and why must you state which one you have used?
Which items should be treated as 'debt' when calculating gearing?
How is interest cover calculated, and what does a low figure tell a lender?
Why does high gearing make the returns to ordinary shareholders more volatile?
Why do the subtotals required by IFRS 18 make operating margin and ROCE more comparable between entities, and how far does that go?
An entity presents its operating expenses by function. What must it disclose that lets you compare its cost structure with an entity presenting by nature?
How is the current ratio calculated, and why is the '2:1' rule of thumb unreliable?
How is the inventory holding period calculated, and what does a lengthening period suggest?
How is the receivables collection period calculated, and what should the denominator be?
What is the cash operating cycle and how is it calculated?
Which combination of ratio movements points to overtrading?
A company signs a large property lease. What happens to its gearing and ROCE under IFRS 16, and why?
How does IFRS 16 change operating profit and interest cover compared with the old operating lease treatment?
Why are a company that leases its assets and one that buys them outright more comparable under IFRS 16 than they were under IAS 17?
Why is cash flow information regarded as higher quality than reported profit?
What can the statement of cash flows tell you that the statement of financial performance cannot?
What are the limitations of the statement of cash flows as a measure of performance?
Why can a consolidated ratio describe no actual business within the group?
How does an associate distort group ratios?
In a group with a non-controlling interest, which profit figure goes into ROE and EPS, and why?
A subsidiary was acquired three months before the year end. Why must you be careful interpreting the group's revenue growth and asset turnover?
How does adopting the revaluation model for property affect the ratios, and why does that limit comparison?
Last year a company recognised a large impairment loss. Why should you be cautious about its improved ROCE this year?
A group's continuing revenue has fallen after it classified a division as a discontinued operation. What must you check before commenting on that fall?
How can the principal versus agent decision in IFRS 15 make revenue growth misleading?
How can the timing rules in IFRS 15 be used to flatter profit?
Why does factoring or selling trade receivables make the ratios look better than the business really is?
How can provisions under IAS 37 be used to smooth reported profit?
How can a change in inventory measurement move reported gross margin?
What are the main limitations of ratio analysis in assessing an entity's performance?
A company has changed an accounting policy during the year. What does that do to your comparison of this year with last year?
Why does a change in an accounting estimate break a trend in a way that a change of accounting policy does not?
Why may a statement of financial position not be representative of the entity's position through the year?
A retailer chooses a year end just after Christmas. How does that affect its reported liquidity?
A company bought a large new factory two weeks before its year end. Why is its ROCE for that year misleading?
How is dividend cover calculated, and what does cover of less than one mean?
A company's shares trade on a much higher P/E ratio than its competitors. What are the possible explanations?
Why may the trend in EPS be a better indicator of performance than the trend in profit?
What are the limitations of EPS as a measure of performance?
In a period of inflation, how does measuring non-current assets at historical cost distort ROCE and gearing?
A company reports a large fair value gain measured using Level 3 inputs. How should that affect your commentary on its performance?
A bank is considering a five-year loan to a company. Which ratios and information should your analysis concentrate on?
An existing shareholder asks whether to continue holding the shares. Which measures answer that question?
What other information, including non-financial information, should be considered alongside the ratios?
Why can the usual profitability and investor ratios not be used to assess a not-for-profit or public sector entity?
How is the performance of a not-for-profit or public sector entity normally assessed instead?
Financial statements - IAS 1
A subsidiary which is classed as an asset held for sale is excluded from the group accounts prepared by the parent. Is this statement true?
What is a “bargain purchase”?
When an exam question says that “the directors value the nci investment on a proportional basis”, what is the examiner effectively saying?
The Share Premium Account is (at least in F7!) ALWAYS a pre-acquisition reserve
What is the difference between “mark-up” and “margin” ?
When an item of TNCA is transferred at a profit within a group, and is still in the possession of a group company as at the year end, the adjustment necessary to remove the unrealised profit is to credit the TNCA and debit which account?
When an item of TNCA is transferred at a profit within a group, and is still in the possession of a group company as at the year end, the adjustment necessary to remove the unrealised profit is to credit the TNCA and debit the retained earnings of the selling company. But with what amount?
The PUP on inventory is calculated based on the value of the intra-group traded goods during the year. Is this statement true?
Where the closing inventory of the intra-group traded goods is 240,000, the value of goods traded during the year is 1,300,000 and mark-up is 20%, the pup necessary is 48,000. Is the following statement true?
Where the closing inventory of the intra-group traded goods is 240,000, the value of goods traded during the year is 1,300,000 and margin is 20%, the pup necessary is 40,000. Is this statement true?
"In an exam question, where the current accounts in the records of the parent and the subsidiary are not in agreement, the consolidation adjustment is to debit (or credit) a suspense account with the difference." Is this statement true?
Where there is cash in transit at the year end from the subsidiary to the parent, the consolidation adjustment is to debit the cash account in the parent and credit the retained earnings in the subsidiary. Is the following statement true?
When there are goods in transit at the year end between the parent and the subsidiary, there is no need to make any adjustment for unrealised profit because the goods are included within the closing inventory of neither the parent nor the subsidiary. Is this statement true?
In a consolidated statement of income question, any pup which is calculated on the closing inventory needs to be adjusted within consolidated cost of sales.
In a mid-year acquisition, we consolidate the newly-acquired subsidiary's results only for the period of the year before the date of acquisition. Is this statement true?
When dealing with a consolidated statement of profit or loss question, it is necessary to eliminate the value of intra-group trading. This is done by debiting Payables and crediting Receivables. Is this statement true?
"When dealing with a 75% subsidiary, we include within the consolidated assets and liabilities JUST OUR SHARE of the subsidiary's assets and liabilities." Is this statement true?
When dealing with an associate company, goodwill on acquisition is calculated in the same way as goodwill on acquisition of a subsidiary. Is the following statement true?
What are the two different ways in which the investment of the non-controlling interest may be measured?
When the non-controlling interest is valued on a proportional basis, how is the share of any impairment in the value of goodwill allocated?
There are three ways in which the examiner can give you information to calculate the value of the non-controlling interest investment as at date of acquisition on a full, fair value basis. What are these three ways?
When a parent sells $130,000 goods to a subsidiary achieving margin of 30% and the subsidiary has a quarter of these goods in inventory at the year end, what value is the provision for unrealised profit?
When a subsidiary has sold goods to the parent and the unrealised profit is calculated as
In what situation is the Statement of Financial Position of the subsidiary time-apportioned
What could be the situations where the cost of acquisition plus the value of the non-controlling interest is actually less than the fair value of the subsidiary's net assets at the date of acquisition?
3 months into the accounting year, the parent sold an item of plant and machinery to the subsidiary and recorded a profit on sale of $40,000. At that date, the asset had a remaining estimated useful life of 4 years. Depreciation is charged on a month by month basis. What is the value of the provision for unrealised profit?
The parent has a 75% holding in a subsidiary. Before the year end, the subsidiary directors declared a dividend of $6,000. How much dividend should be deducted from the calculation of consolidated retained earnings?
When preparing a Consolidated Statement of Profit or Loss, we are told that during the year the subsidiary sold goods to the parent with a selling value of $27,000. The goods had cost the subsidiary $27,000. What adjustment is necessary?
What is the basis of the calculation of the non-controlling interest investment for the consolidated statement of financial position?
What is the basis for the calculation of Consolidated Retained Earnings for the Consolidated Statement of Financial Position?
When preparing the Consolidated Statement of Profit or Loss, you are told that the associate entity sold goods to the parent during the year of $60,000 (at cost to the parent). The parent had none of these goods in inventory as at the year end. What adjustment is necessary?
What is a “cash equivalent” in the context of a Statement of Cash Flows?
What are the three main sub-divisions in a Statement of Cash Flows?
In a Statement of Cash Flows, is a profit on disposal of an asset deducted in arriving at cash generated from operations, or is it added?
In a Statement of Cash Flows, is the figure for tax paid deducted in arriving at net cash flow from investing activities, or is it added?
What are the two alternative methods for the preparation of a Statement of Cash Flows?
Is an increase in the value of closing inventory, when compared with the previous year value
What is the accounting for negative goodwill?
Into which five categories does IFRS 18 require income and expenses to be classified in the statement of profit or loss?
Which subtotals must be presented in the statement of profit or loss under IFRS 18?
How may operating expenses be presented under IFRS 18, and what extra disclosure does one of those options trigger?
What did IFRS 18 change when it replaced IAS 1, and what did it leave unchanged?
A subsidiary's plant is fair valued $2m above its carrying amount at the acquisition date. What effect does that fair value adjustment have on goodwill?
At acquisition a subsidiary's plant was worth $2m more than its carrying amount and had four years of life left. Two years later, how does that fair value adjustment affect the consolidated financial statements?
Why does a fair value uplift on a subsidiary's land affect goodwill but not consolidated retained earnings?
A subsidiary's inventory was fair valued $300,000 above its carrying amount at acquisition, and all of that inventory had been sold by the year end. How is the adjustment dealt with?
A subsidiary has a loan carried at $5m, but because it bears a below-market interest rate its fair value at acquisition is only $4.6m. How is this dealt with on consolidation?
A subsidiary discloses a contingent liability that IAS 37 does not allow it to provide for. How is it treated in the consolidated financial statements at the acquisition date?
A subsidiary has a well-known brand name and a customer list that it has never recognised because they were internally generated. What happens to them on consolidation?
What is the standard working for goodwill arising on the acquisition of a subsidiary?
Part of the price for a subsidiary is $2.42m payable in cash in two years' time, and the parent's cost of capital is 10%. What goes into the goodwill working, and what happens afterwards?
A parent will pay a further $1m only if the subsidiary meets a profit target. How is that contingent consideration treated at acquisition and afterwards?
Parent Co acquired 80% of Sub Co's 10 million $1 shares by issuing two of its own $1 shares for every five shares acquired, when its own share price was $3. What is the consideration and how is it recorded?
How are the legal and due diligence fees of acquiring a subsidiary treated, and how are the costs of issuing the shares used to pay for it treated?
A parent acquired 75% of a subsidiary on 1 May in a year ending 31 December. How much of the subsidiary's income and expenses is consolidated, and on what assumption?
How does the consolidated statement of profit or loss end where there is a non-controlling interest?
How is the non-controlling interest's share of profit calculated for the consolidated statement of profit or loss?
A 75%-owned subsidiary revalued its property upwards during the year. How is that reflected in the consolidated statement of profit or loss and other comprehensive income?
A parent charges its subsidiary an annual management fee and also receives interest on a loan it has made to the subsidiary. What happens to these in the consolidated statement of profit or loss?
The parent's own statement of profit or loss includes $400,000 of dividend income received from its 80% subsidiary. What is done on consolidation?
Which columns appear in a single entity's statement of changes in equity?
Which movements are shown, in order, in a statement of changes in equity?
A company's directors declared a final dividend on 15 February, after the 31 December year end. How does it appear in the statement of changes in equity for the year to 31 December?
How do a bonus issue and a rights issue made at a premium each appear in the statement of changes in equity?
How is the non-controlling interest column of a group statement of changes in equity built up?
Which totals and subtotals must be presented in the statement of profit or loss under IFRS 18?
A company with no specified main business activity has interest on its borrowings and lease liabilities, interest earned on its bank deposits, and a share of an associate's profit. Where does IFRS 18 classify each?
What is the complete set of financial statements under IFRS 18?
Under the indirect method, which figure is the starting point of the statement of cash flows following IFRS 18's amendments to IAS 7?
Where are interest paid and dividends paid classified in the statement of cash flows of a company with no specified main business activity?
Where are interest received and dividends received classified in the statement of cash flows of a company with no specified main business activity?
A company's bank overdraft, which is repayable on demand, increased during the year. Is the increase a financing cash inflow?
Current tax was $180,000 and deferred tax $60,000 at the start of the year, and $200,000 and $90,000 respectively at the end; the charge in profit or loss was $250,000. How much tax was paid?
How are the cash paid for property, plant and equipment and the proceeds of a disposal derived from the notes?
Retained earnings were $840,000 at the start of the year and $910,000 at the end, and profit for the year was $260,000. What dividend was paid?
Share capital rose from $500,000 to $700,000 and share premium from $150,000 to $340,000, and the year included a $60,000 bonus issue made out of retained earnings. What cash did the share issues raise?
The finance cost in profit or loss is $95,000, and accrued interest payable was $12,000 at the start of the year and $7,000 at the end. How much interest was paid?
In the indirect method, how are an increase in inventory, an increase in receivables and an increase in payables each treated?
A company recognised a right-of-use asset of $800,000 and a matching lease liability on entering a new lease. How does that appear in the statement of cash flows?
Where do the cash payments made under a lease appear in the statement of cash flows?
A company entered into a significant lease during the year that required no payment at inception. What does IAS 7 require in respect of it?
A group paid $4m for 30% of an associate when the associate's retained earnings were $6m. At the year end they are $10m and the investment has been impaired by $150,000. What is the carrying amount in the consolidated statement of financial position?
How is an associate presented in the consolidated statement of profit or loss?
Are an associate's assets, liabilities, revenue and expenses added to the group figures line by line?
A group acquired 40% of an associate three months before the year end. What share of the associate's profit is equity accounted?
In which IFRS 18 category is the share of an associate's profit presented?
Goodwill in a 75%-owned subsidiary is $600,000 with the non-controlling interest measured at the proportionate share of net assets. Its other net assets are $2.4m and its recoverable amount as a cash-generating unit is $2.6m. What impairment is recognised?
A goodwill impairment of $600,000 has been identified in a 75%-owned subsidiary whose non-controlling interest was measured at fair value at acquisition. How much is recognised and how is it shared?
How is goodwill arising on consolidation accounted for after the acquisition date?
Which consolidated figures does a goodwill impairment change?
Parent Co sold its entire holding in a subsidiary for $9m; the investment had cost $5.5m. What gain appears in Parent Co's own statement of profit or loss?
A parent sold its entire 80% holding for $9m when the subsidiary's net assets were $8m, unimpaired goodwill was $1.2m and the non-controlling interest stood at $1.9m. What is the gain in the group financial statements?
Why is the gain on disposal of a subsidiary different in the group financial statements from the gain in the parent's own financial statements?
A parent disposed of its entire holding in a subsidiary nine months into the year. How much of the subsidiary's results and net assets are consolidated?
A disposed subsidiary was a separate major line of business. How are its results and the group gain on disposal presented?
A subsidiary's revaluation surplus was $200,000 when the parent acquired 75% of it and is $500,000 at the year end. How does it appear in the consolidated statement of financial position?
Whose share capital and share premium appear in a consolidated statement of financial position?
A lease liability stands at $50,000 at the year end, the next annual payment of $12,000 falls due in twelve months, and the interest rate is 8%. How is the liability split on the statement of financial position?
A company issued a $10m 3% loan note at par, incurring $400,000 of issue costs; the effective interest rate is 5%. What finance cost and what liability appear in the first year?
A company revalued its property upwards, creating deferred tax on the revaluation. Where is that deferred tax presented?
In a contract with a customer, how do a receivable, a contract asset and a contract liability differ on the statement of financial position?
What are the five standard workings for a consolidated statement of financial position?
Why does an error in the subsidiary's net assets working cost marks twice in a consolidation question?
A parent's receivables include $60,000 owed by its subsidiary and the subsidiary's payables include the same amount. What is the consolidation adjustment and its effect on the group?
A parent has lent $2m to its subsidiary, and $50,000 of interest on the loan is accrued and unpaid at the reporting date. What is eliminated from the consolidated statement of financial position?
The group's receivables include $80,000 owed by its associate. Is that balance eliminated on consolidation?
How do the consolidation workings change when a parent has two subsidiaries rather than one?
Can a parent measure the non-controlling interest at fair value in one subsidiary and at the proportionate share of net assets in another?
Which profit figure is used as the earnings in basic earnings per share for a group?
What does IAS 33 require to be presented on the face of the statement of profit or loss?
Card 1 of 410. Question side.