CIMA CIMA-F2
CIMA F2 Advanced Financial Reporting Flashcards
What separates the money markets from the capital markets, and which one is F2 about?
What are the two routes by which funds reach a company, and what does the intermediary add?
Primary market versus secondary market — what is traded, who gets the cash, and what is each for?
No cash reaches the company when its shares are traded between investors. Give two reasons the company should still care about the secondary market.
Name the four tiers of market available for long-term funds, and what an issuer trades away at each.
Order-driven or quote-driven: how does each set a price, and which suits a thinly traded security?
What is the bid-offer spread, why does it exist, and what makes it widen?
Give five features of how bond markets operate that differ from share markets.
Why is the coupon rate not the cost of debt?
Name the seven advisors on a listing and what each one does.
A trade in a share has been agreed. What do clearing and settlement each do, and what is a central counterparty for?
What does a stock market index do, and why would a company want to be included in one?
What obligations does a listed company accept in return for access to public investors?
Listing obligations make a listing expensive. Why does a listed company nevertheless have a lower cost of capital?
What is a eurobond, and does it have to involve Europe or the euro?
Deltaway, an unlisted company, needs about $60 million. What are the advantages of seeking admission to the main market rather than placing shares privately?
What are the disadvantages for a company like Deltaway of admission to the main market rather than a private placing?
What is due diligence when a company comes to the market, and where does it fall in the process?
What does an ordinary share actually promise, and why does it cost the company the most?
Why are retained earnings not a free source of finance?
List the five features of a preference share, and the five varieties.
How does IAS 32 classify a redeemable preference share, and why does it matter for Chapter 3?
Why does an unlisted company find equity finance harder to raise, and what is left open to it?
Name the five methods of issuing shares and the distinctive risk or benefit of each.
Give the formula for the theoretical ex-rights price and the value of a right.
Fixed charge, floating charge, unsecured — what is the difference and what follows from it?
What is a covenant, give three examples, and what happens if one is breached?
Compare equity and debt on the six things that decide which to use.
Kestrel has 20 million shares quoted at $4.00 cum rights and makes a 1 for 4 rights issue at $3.00. What are the funds raised, the TERP and the value of a right?
A Kestrel shareholder holds 400 shares worth $4.00 each before the 1 for 4 issue at $3.00 (TERP $3.80) and does nothing with the rights. What does that cost?
In ABC's tender, cumulative bids are 8,600,000 shares at 350c, 10,300,000 at 325c and 10,800,000 at 300c. Which price raises $30 million, and which maximises proceeds?
A stock exchange introduction raises no new capital. Why would a company's founders use one?
How do a floating rate note's interest cost and market price behave, compared with a fixed-coupon bond?
Where does the investor's return come from on a zero coupon or deep discount bond, and why might a company issue one?
How does a bond with warrants attached differ from a convertible bond?
What is mezzanine or high-yield debt, and when is it used?
What is the difference between a term loan, a revolving credit facility and a syndicated loan?
What two features set a bond issue apart from the general process of coming to the market?
State the WACC formula and the three-step method that answers every WACC question.
How is each source of finance valued for a WACC, and what is the classic trap?
Give the dividend valuation model in both directions, and say which price it uses.
Two ways of estimating the dividend growth rate — the formulae, and the trap in each.
What is the cost of equity when dividends are NOT expected to grow?
What is the post-tax cost of BANK BORROWING, and how does a bank loan enter the WACC?
Yield to maturity or post-tax cost of debt — what is the difference, and why is one not the other times (1 − T)?
Give the cost of debt for irredeemable, redeemable and convertible traded debt.
Name the five conditions that must hold before a WACC can be used as a project's discount rate.
Give five limitations of the weighted average cost of capital.
A project is much riskier than the company's existing business. What goes wrong if it is discounted at the company's WACC?
Banks Ltd has just paid a dividend of 10c, its ex-div share price is $2.50 and dividends grow at 4% a year. What is its cost of equity?
A share is quoted at $4.15 cum div, a dividend of 35c is about to be paid and dividends grow at 5% a year. What price goes into the dividend valuation model, and what is the cost of equity?
Wilson paid a dividend of 25c five years ago and the current dividend is 42c. What is the historic dividend growth rate?
Charlton earns a return of 15% on capital employed and pays out 25% of its profits after tax as dividends. What growth rate does Gordon's growth model give?
Moore's 8% $1 preference shares trade at $1.10 ex div. What is their cost, and why is there no tax adjustment?
Bobby's 10% irredeemable loan notes are quoted at $120 ex interest and tax is 25%. What is the company's cost of debt, and what yield does an investor earn?
Hunt's loan notes can be redeemed in 4 years at a 10% premium to par, or converted into 25 shares. The shares are worth $5 now and grow at 2% a year. Which redemption value goes into the cost of debt?
Ramsey's market values in $000 are: equity 64,000 costing 17.68%, bonds 5,640 costing 7.33% and a bank loan 4,000 costing 3.75%. What is the WACC?
State the core principle of IFRS 15 and the five steps.
List the five criteria a contract must meet before IFRS 15 applies, and what happens if they are not met.
When is a good or service DISTINCT, and why is a construction contract one performance obligation?
What four complications affect the transaction price, and how is each handled?
How is the transaction price allocated, and what if a stand-alone selling price is not observable?
Give the three criteria for a performance obligation satisfied OVER TIME.
What five indicators show that control has passed at a POINT IN TIME?
How is progress measured on an over-time obligation, and what is the trap?
How is a LOSS-MAKING contract accounted for?
Distinguish a receivable, a contract asset and a contract liability, and give the contract-asset calculation.
Luckers sells a car for $10,000 with three years' interest-free credit, and the customer's credit rate is 5%. How much revenue is recognised on delivery, and what happens to the rest?
Richer sells a home entertainment system with a two-year maintenance package for $10,000. Sold separately they cost $9,000 and $2,000. How is the $10,000 allocated?
Ternion gives a 'free' phone with a 12-month contract at $45 a month. A competitor sells the handset for $480 and calls and data for $20 a month. How is Ternion's revenue recognised?
On 1 July 20X7 LiverTech sells installation (stand-alone $1,500) and two years' support ($500) for $1,600. What revenue and deferred income arise in the year to 31 December 20X7?
Alex's $45m contract: costs to date $20m, $12m to complete, 70% complete, work certified this year $15m, profit taken last year $3.3m. What profit and cost of sales are recognised this year?
Noah ($000): costs on work completed 60,000, recognised profit 12,800, progress billings 45,000, cash received 26,500, materials for future years 8,000. What are the contract asset, receivables and inventory?
When a third party helps supply the customer, how does an entity decide whether it is principal or agent, and what difference does it make to revenue?
A vendor sells an asset and is required, or has an option, to buy it back later. What is the likely substance, and how is it accounted for if the vendor keeps control?
An entity bills a customer but keeps the product until a later delivery date. When can it still recognise revenue?
Goods are delivered to a dealer on consignment. When is revenue recognised, and in whose books is the inventory?
A salesperson earns a commission for winning a contract. How does IFRS 15 treat that cost?
IFRS 16 is asymmetric between the two parties. State the split, and why it exists.
State the classification test, and say what an operating lease is.
List the five situations that would normally lead to finance lease classification.
When is a lease's classification made, and when is it reassessed?
How does a lessor account for an OPERATING lease? Three points.
The straight-line trap: what does 'straight line over the lease term' actually mean, and where does the difference go?
Define the gross and the net investment in a lease, and name the rate used.
The residual value trap. A five-year lease has $5,000 annual rentals, a residual value of $2,000 of which $1,600 is guaranteed to the lessor. What goes into the gross investment?
How does a manufacturer or dealer lessor differ from any other lessor?
Sale and leaseback: what is the first question, and what follows from each answer?
Besides the five main situations, what three further indicators can point to a finance lease?
In substance, what has a lessor done when it grants a finance lease, and what three accounting steps follow?
Which amounts does a lessor include in the lease payments receivable when it measures its net investment?
Cherry's 5-year lease: $5,000 a year in advance, guaranteed residual $1,600, unguaranteed $400, rate 4% (factors 0.962, 0.925, 0.889, 0.855, 0.822). What is the net investment and the unearned finance income?
Cherry's lease receivable starts at $24,799, rentals of $5,000 are received at the start of each year and the rate is 4%. What is the year 1 finance income and the receivable at the end of year 1?
Why does IFRS 16 restrict a dealer lessor's selling profit when it quotes an artificially low interest rate, and why are its costs of obtaining the lease expensed at once?
Where does a lessor present a finance lease and an operating lease, and what maturity analysis must it disclose?
Under IFRS 18, how does a leasing company whose main business activity is providing finance to customers present its lease income differently from a manufacturer leasing out a surplus machine?
Why does IAS 37 set conditions instead of leaving provisions to judgement?
Define a provision, and state the three recognition conditions.
What is a constructive obligation, and what are its two limbs?
How is the best estimate measured for (a) a single obligation and (b) a large population?
When is a provision discounted, and how is the unwinding treated — in IAS 37 terms and under IFRS 18?
Three measurement rules that catch people out: disposal gains, reimbursements, and what a provision may be used for.
Define a contingent liability, and say how it is treated.
Draw the asymmetry: what happens to an outflow and to an inflow at each level of likelihood?
Define an onerous contract and say how the provision is measured. Why is a loss-making lease not one?
When does a restructuring create an obligation, and what may the provision NOT include?
An oil rig clean-up claim could settle at $25m (20% likely), $40m (45%) or $65m (35%). What is the starting point for the provision, and why might a higher figure be justified?
HR Co expects to pay $495,000 on 30 June 20X9 to settle a claim that arose on 1 July 20X8; the one-year discount factor at 10% is 0.9091. What appears in its financial statements at 31 December 20X8?
Under IFRS 18, where do HR Co's $450,000 provision expense and its $22,500 unwinding of the discount appear in the statement of profit or loss?
An entity acquires a mine that it must landscape in ten years, at a cost with a present value of $2 million; its discount rate is 10%. The directors want to accrue $200,000 a year. What is the correct treatment?
Justina's solicitor gives her a 42% chance of losing a food-poisoning claim, with a likely $300,000 to pay if she loses. How is it treated, and what would change if the chance of losing were 58%?
About 5% of G-Star's sales lead to a warranty claim, and a liability under its guarantee of another company's overdraft is possible. Why is the warranty provided for but the guarantee only disclosed?
Daiva must buy 900 metres of cloth a month at $7 for 2 more months. She can resell cloth at $6.25 a metre or cancel for a $700 penalty a month; producing dresses would cost a net $1,800. What provision is recognised?
The directors of Paulius decided on 18 August 20X7 to close the Kaunas factory but told nobody before the 31 August year end. Is a provision recognised, and what would have created one?
Inventory worth $100,000 is stolen just before the year end, and the insurers say full reimbursement is probable but have not confirmed it. How is the claim treated, and when does that change?
A division is expected to make operating losses for the next few years. Why can no provision be made, and what does the expectation indicate instead?
Why is no provision made for a future overhaul of an entity's own asset, even where the overhaul is unavoidable in practice, and how is the cost dealt with instead?
Define a financial instrument, and say which standard does what.
Give the three IAS 32 definitions, and say what the word 'contractual' rules out.
State the IAS 32 liability-or-equity test, and classify: ordinary shares, redeemable preference shares with a fixed cumulative dividend, irredeemable preference shares with a discretionary dividend.
How are transaction costs treated on a financial asset, on a financial liability, and on an FVTPL asset — and why?
How is an investment in DEBT classified under IFRS 9?
How is an investment in EQUITY classified, and what is the one rule that catches everyone out?
Two things are called FVTOCI. What is the difference?
Amortised cost: which rate is applied to what, and why does the balance rise while cash is being paid?
How is a convertible bond accounted for on issue, and what are the two discount-rate traps?
Define a derivative, state its measurement, and explain why its fair value is nil on day one.
Norman buys 100,000 listed shares at $5 each plus $0.25 a share commission, makes no election, and at the year end they are worth $3.50 each. What is charged to profit or loss?
Norman buys shares for $500,000 plus $40,000 transaction costs and elects FVTOCI. They are worth $620,000 at the year end and are sold next year for $650,000. What reaches profit or loss on the sale?
Norman buys 10,000 $100 debentures at a 2% discount to hold to redemption; the coupon is 4% and the effective rate 5.73%. What is the year 1 interest income and the closing carrying amount?
Larkin issues 20,000 $100 debentures at par with issue costs of $100,000; the coupon is 2% and the effective rate 4.58%. At what amount is the liability first recognised, and what is the year 1 finance cost?
Alice issues $100 million of 4% three-year convertible debentures at par; similar debt without the option costs 6% (discount factors 0.943, 0.890, 0.840). How is the issue split?
At the end of year 3, what happens to Alice's $5.3 million equity component if the holders convert, and if they take cash?
Wayne has a forward contract to buy 12 million Dinar at $1 = 6 Dinar. At its year end the forward rate is $1 = 5.6 Dinar. What is the contract's fair value, and why is it an asset?
Wayne's derivative asset was $68,966 at the end of 20X8 and $142,857 at the end of 20X9. What gain goes to profit or loss in 20X9?
How are the costs of issuing equity, and an entity's purchase of its own shares (treasury shares), dealt with?
How does IFRS 9's expected credit loss model differ from the IAS 39 approach, and which assets does it apply to?
When can a financial instrument be reclassified under IFRS 9?
Under IFRS 18, where does the 'dividend' on redeemable preference shares classified as a liability appear?
Define an intangible asset, and say what each part of the definition rules out.
State IAS 38's two recognition criteria, and name the four routes by which an intangible can arrive.
What goes into the cost of a separately acquired intangible — and what is specifically excluded?
State the six development criteria.
A project runs research from February to July and development from August. Why does the February–July spending stay in profit or loss?
An intangible asset is still in development at the reporting date. Is it amortised? What is required instead?
Define an active market, and say why the revaluation model is almost never available for intangibles.
Finite versus indefinite useful life: four differences.
What residual value is assumed for an intangible asset, and what are the two exceptions?
Why can a subsidiary's internally generated brand appear in the consolidated financial statements when the subsidiary itself could never recognise it?
Kestrel buys a licence for $600,000, plus $30,000 non-refundable duty and $45,000 legal fees on the agreement. It spends $80,000 on launch advertising and $25,000 training sales staff. What is the licence's cost?
Kestrel's licence cost $675,000, runs for eight years, cannot be renewed and was available for use on 1 April 20X5. What is its carrying amount at the 31 December 20X5 year end?
What is the difference between research and development under IAS 38?
Is computer software an intangible asset or property, plant and equipment?
Under the revaluation model for an intangible asset, where do revaluation gains and losses go?
When is an intangible asset derecognised, and how is the gain or loss on disposal measured and presented?
What does the intangible assets note disclose for each class, and which figure is often the single most useful number in it?
Under IFRS 18, where do research expenditure and amortisation of intangibles appear, and what extra disclosure applies if expenses are presented by function?
What three things make up the income tax expense in the statement of profit or loss?
Define deferred tax — and say what accounting for it does NOT do.
Permanent or temporary difference — what is the distinction, and which one does IAS 12 deal with?
Define the tax base of an ASSET and the tax base of a LIABILITY.
State the four steps for calculating deferred tax.
Carrying amount against tax base: when do you get a deferred tax liability and when an asset? Careful — the rule reverses.
State the recognition rule for a deferred tax liability and for a deferred tax asset, and explain the asymmetry.
At what rate is deferred tax measured — and is it discounted?
Where is the movement in deferred tax recognised? Work the revaluation case.
How are current tax and deferred tax PRESENTED, and when may balances be offset?
Bramwell provided $180,000 for 20X4 tax, later agreed at $195,000, and estimates 20X5 tax at $210,000. What is the 20X5 income tax expense, and what would it be had 20X4 been agreed at $172,000?
Without deferred tax, Tracy earns $2,000,000 profit before tax each year but reports profit for the year of $1,900,000, $1,500,000 and $1,480,000. What two things are wrong with that result?
Tracy's plant cost $5 million. At the end of 20X5 depreciation to date is $1,000,000 and tax depreciation to date is $2,500,000; the tax rate is 20%. What deferred tax is recognised?
Tracy's deferred tax liability falls from $300,000 at the end of 20X5 to $200,000 at the end of 20X6, and current tax for 20X6 is $500,000. What is the 20X6 income tax expense, and what is the double entry?
With deferred tax, Tracy's income tax expense is $400,000 in each of 20X5 to 20X7, on profit before tax of $2,000,000. Why is that the figure to expect, and has the tax payable changed?
Interest receivable of $40,000 will be taxed only when the cash is received, and the tax rate is 20%. What is its tax base, and what deferred tax arises?
A fine of $50,000 is payable and will never be deductible for tax. What temporary difference and deferred tax arise?
Which IAS 12 disclosure answers the reader's question 'why is the tax charge not simply profit times the tax rate?', and what typically shows up in it?
Define the functional currency, and say whether it is chosen or determined.
List the indicators of the functional currency, and say which carry the most weight.
When may an entity change its functional currency, and how is the change accounted for?
Functional currency versus presentation currency — the distinction in one card.
At what rate is a foreign currency transaction recorded, and what practical expedient is available?
Define a monetary item, and give the case that shows why “readily convertible into cash” is the wrong test.
State the three reporting-date rules, and the principle that links them.
A purchase for 400,000 Dinar on 1 December at 4.1 to $1, still unpaid at the 31 December year end (4.3), settled on 10 January (4.4). What are the differences, and in which periods?
Where do exchange differences go — and what is the one exception to learn?
What does IFRS 18 change for IAS 21 from 2027 — and what does it not change?
Sable, incorporated in a Krona country, invoices 85% of its output in dollars and buys 80% of its costs in dollars; local wages are 15% of costs. What is its functional currency, and can the directors make it Krona?
Zephyr (functional currency the dollar) bought a machine for 240,000 Dinar at 6.0 Dinar to $1 and carries it at cost. At the year end the rate is 5.0. At what amount is the machine carried, and what is the common error?
Zephyr's land cost 900,000 Dinar at 6.0 Dinar to $1 and is revalued at the year end to 1,050,000 Dinar, when the rate is 5.0. What is the increase, and where does it go?
A provision to be settled in cash is only an estimate. Is it a monetary item, and is it retranslated at the closing rate?
An entity has paid a foreign supplier in advance for goods it has not yet received. Is the prepayment retranslated at the year end?
Marlow has exchange losses of $180,000 on trade receivables, $40,000 on trade payables and $6,000 on untraceable legacy balances, and a $95,000 gain on a bond it issued. How is each classified under IFRS 18?
Why would Marlow's single 'net exchange gains and losses' line of $131,000 misstate its results under IFRS 18?
What does IAS 21 (as amended in 2023) require when a currency is not exchangeable into another at the measurement date?
IFRS 18 — what it replaces, when it applies, and the one thing it does not do.
How many IFRS 18 categories are there, and what are they?
Why is the operating category described as the residual, and what test follows from that?
Name the required totals and subtotals, and say how you build them.
The share of profit of an equity-accounted associate: which category, and what changed?
A lease liability, a discounted provision and a defined benefit obligation are not financing liabilities. So where does the charge on them go?
How is an exchange difference recognised in profit or loss classified?
Operating expenses: what are the three presentations, and what does choosing 'by function' cost?
State the four aggregation and disaggregation principles, and say what a material 'other' line signals.
Management-defined performance measures: the definition, what is outside it, and what the note must say.
What is IFRS 18’s aggregation/disaggregation message?
What must an MPM reconciliation show?
What three problems with IAS 1 does IFRS 18 address?
Kestrel ($000): revenue 42,600, cost of sales 25,900, distribution costs 3,400, administrative expenses 4,750 and an impairment loss on goodwill of 600. What is operating profit?
Kestrel ($000): operating profit 7,950; rental income from investment property 1,150; dividend from a 5% holding 240; interest on cash 180; share of associate profit 820. What is profit before financing and income taxes?
Kestrel ($000): profit before financing and income taxes 10,340; bank interest 1,260, lease interest 340, provision discount unwinding 90, and an exchange loss on a foreign currency loan 150. What is profit before tax?
Had Kestrel's $150,000 exchange loss arisen on a trade payable instead of a foreign currency loan, what would change in its statement of profit or loss?
A pre-2027 statement shows one 'other income' line holding rental income from investment property, dividends received and sundry operating income. How is it presented under IFRS 18?
Kestrel's 'adjusted operating profit before restructuring costs' is an MPM. Why must its note show the effect on non-controlling interests of each reconciling item?
Are items of other comprehensive income classified into the operating, investing and financing categories?
Tax paid is an operating activity in the statement of cash flows. Is the tax charge then in the operating category of profit or loss?
IAS 33 is not rewritten by IFRS 18. What is the one consequential change for earnings per share?
Why is the exception for an entity whose specified main business activity is investing or financing a limit on comparability?
Why are consolidated financial statements prepared at all, and for whom?
State IFRS 10's definition of control. What is wrong with 'the power to govern the financial and operating policies so as to obtain benefit from its activities'?
"Control is more than 50% of the voting shares." Why is that only a rule of thumb, and give the exceptions both ways.
Name the group-accounting standards on the F2 syllabus and say what each does.
The two ways of measuring non-controlling interests: name them, and give the four consequences of the choice.
Give the goodwill calculation, and say what happens to goodwill after the acquisition date.
List the five standard workings and say what each one exists to produce.
A subsidiary's asset had a carrying amount of $1,500 and a fair value of $3,500 at acquisition, with a four-year remaining life. Two years have passed. What are the three things you do?
Unrealised profit: give the double entry, the seller test, and the arithmetic for a mark-up and for a margin.
Consideration that is not cash: how is a share exchange, deferred consideration and contingent consideration each measured — and what does each do to goodwill afterwards?
What is the acquisition date in a business combination, and what depends on it in the consolidation?
Peter paid $1,000,000 for all of Steven on the day Steven's share capital was $250,000 and its retained earnings $750,000. What is the goodwill, and why does none of the $750,000 reach group retained earnings?
Why are the non-controlling interests shown within equity in the consolidated statement of financial position, and not as a liability?
What is a parent paying for when it pays more than the fair value of a subsidiary's identifiable net assets, and why does that goodwill appear only in the consolidated statements?
A parent buys 75% of a subsidiary for $156,000. The remaining shares are worth $56,000 and the identifiable net assets $170,000. What is goodwill under each NCI method, and what is the difference?
Besides property, plant and equipment, which two fair value adjustments at acquisition does a consolidation commonly need, and which way does each move the subsidiary's net assets?
Richard bought 80% of Andy on 1 August, five months before the year end. Andy's year-end retained earnings were $600,000 after a profit for the year of $120,000. What were its retained earnings at acquisition?
At the year end P's receivable from S is $1,500 but S's payable to P is $1,000, because S's $500 cheque had not reached P. What entries are made, and in what order?
Molly, 80% owned, sold goods to its parent James for $120,000 at a 20% mark-up, and half are still held. What is the PUP, where does it go, and do the non-controlling interests bear any of it?
Harry acquires 80% of Sally's 10 million $1 shares, issuing one Harry share for every four acquired. Harry's shares are worth $3 each. What is the cost of the investment, and how is the share issue recorded?
Pony buys 80% of Star's 30 million shares: two Pony shares (fair value $2) for every three acquired, plus $1 a share acquired payable in a year (discount factor 0.91). What is the consideration, and the unwinding?
AB owns 75% of XY, with the NCI at fair value. XY has earned $5,000 since acquisition, and goodwill of $2,100 has been impaired by 20%. How much in respect of XY is in group retained earnings?
CD owns 60% of PQ, with the NCI at the proportionate share of net assets. In $000, PQ's net assets were 6,500 at acquisition and are 11,900 now, and goodwill is impaired by 500. What is the NCI?
State the order of work in a consolidated statement of profit or loss, and say where each consolidation adjustment lands under IFRS 18.
When is a component of a group a discontinued operation, and what exactly does that change in the consolidated statement of profit or loss?
The share of profit of associates and joint ventures: where did it sit, where does it sit now, and why does the difference cost marks?
Why can a single 'Other income' caption not survive in a 2027 consolidated statement of profit or loss?
Which figures in a consolidated statement of profit or loss and other comprehensive income are attributed between the owners of the parent and the non-controlling interests?
A subsidiary is acquired part-way through the year. What exactly is pro-rated?
Provision for unrealised profit: the two formulae, which column it goes in, and why the column matters.
Fair value depreciation on a subsidiary's assets: how much is charged, and in whose column?
An impairment of goodwill is charged in the year. Which column does it go in, and what turns on the answer?
What does IFRS 18 NOT change about a set of group accounts?
Eliminating intra-group sales does not change group profit. Why must it still be done, and for how much?
A subsidiary pays a dividend after its acquisition. How is the parent's share treated in the consolidated statement of profit or loss, and where does the non-controlling interests' share go?
A group has nothing in the investing or financing categories, so profit before financing and income taxes equals operating profit. Can the second subtotal be left off the statement?
Edinburgh sold goods invoiced at $10m, at a 25% mark-up, to Aberdeen, its 75% subsidiary, which still holds them all. What is the PUP, whose column is it in, and what is the NCI's share of Aberdeen's $30m profit?
Pip bought 80% of Posy on 1 July. Revenue is 250 (Pip) and 280 (Posy), cost of sales 100 and 160 ($m). Posy then sold Pip $10m of goods; PUP 1, fair value depreciation 0.2. Group revenue and cost of sales?
Posy, 80% owned and acquired on 1 July, made a profit for the year of $50m and paid a $10m dividend after acquisition; its PUP is $1m and the fair value depreciation $0.2m. What is the NCI's share of profit?
Gary owns 80% of Nick, NCI at fair value. Nick's profit is 11,500, its own PUP 500 and the goodwill impairment 1,000 ($000). What is the NCI's share of profit, and what would it be at the proportionate share?
WM is 80% owned, NCI at fair value. After the goodwill impairment its profit for the year is 1,820 and its revaluation gain in OCI 200 ($000). What are the NCI's shares of profit and of total comprehensive income?
What are the three money columns of a consolidated statement of changes in equity, and what is each one?
How is the OPENING balance attributable to the owners of the parent calculated?
How is the OPENING non-controlling interests balance calculated?
When can the opening non-controlling interests be found in one step as "NCI% × the subsidiary's equity at that date", and when does that shortcut fail?
How are dividends split in a consolidated statement of changes in equity?
A parent has recorded the dividend received from its subsidiary as investment income. What must be done before the total comprehensive income row is split?
In what ORDER should you build a consolidated statement of changes in equity in an exam?
Why must the split of the movement row use TOTAL COMPREHENSIVE income rather than profit for the year?
How does IFRS 18 change the consolidated statement of changes in equity?
A parent that already controls a subsidiary buys a further slice of it from the non-controlling shareholders. How is the difference between what it pays and the carrying amount of the non-controlling interests transferred accounted for?
Which primary statement shows the non-controlling interests as a column of their own, rather than as a single line?
Penny acquired 70% of Sophie when Sophie's equity was 48,200. At the start of the year Penny's equity is 280,250 and Sophie's 85,100 ($000). What is the opening balance attributable to the owners of the parent?
Penny group: 30% NCI at the proportionate share of net assets; Sophie's equity was 48,200 at acquisition and is 85,100 at the start of the year ($000). What is the opening NCI balance?
Penny's profit for the year is 51,200 and its 70% subsidiary Sophie's is 10,000 ($000), with no adjustments and no other comprehensive income. How is total comprehensive income split?
Penny pays a dividend of 10,000 and its 70% subsidiary Sophie pays 4,000 ($000). What goes on the dividends row of the group statement of changes in equity?
In the Penny group ($000) the opening balances are 306,080 (parent) and 25,530 (NCI), total comprehensive income 58,200 and 3,000, dividends 10,000 and 1,200. What are the closing balances and what is the check?
Which share issues appear in a consolidated statement of changes in equity, and in which column?
A subsidiary was acquired part way through a previous year. Over what period is the post-acquisition movement in the opening balances measured?
How does IAS 28 define SIGNIFICANT INFLUENCE, and how does it differ from control?
State the 20% presumption in IAS 28 — in BOTH directions.
What evidence does IAS 28 give for the existence of significant influence?
Set out the working for INVESTMENT IN ASSOCIATE in the consolidated statement of financial position.
Why must every adjustment to the investment in associate have a matching entry in group reserves?
An investment in an associate is impaired by $2 million and the group owns 25%. How much is deducted?
Trading between the group and an associate leaves unrealised profit in inventory. How much is eliminated, and what are the entries?
Where does IFRS 18 put the share of profit of an equity-accounted associate, and where did it used to go?
Time apportionment for an associate acquired part way through the year: what do you apportion, and what do you not?
Why is there no non-controlling interest in an associate?
How is a joint venture accounted for in the group accounts, and how does a joint operation differ?
Holding A: 19%, with a board seat and an interchange of managers. Holding B: 30% of a company controlled absolutely by one other shareholder, with no board seat and no dealings. Which may well be an associate?
Under the equity method, why does a dividend from an associate reduce the investment instead of counting as group income?
Rey paid $200m for 25% of Ben on 1 July 20X5. Ben's profit for 20X5 is $80m and it declared a $20m dividend on 31 December. What is the investment in associate at 31 December 20X5?
Rey's own statement of financial position shows Investments of $1,540m: the cost of subsidiary Finn ($1,340m) and of associate Ben ($200m). What happens to that line on consolidation?
LR owns 40% of GH. LR bought goods for $500,000 from GH, a quarter are still in LR's inventory, and GH marks up by 25%. What consolidation adjustment does LR make?
Vader bought 25% of Sith on 1 May 20X5. Sith's profit for the year is $240m and the investment is impaired by $2m. What is the share of profit of associate, and where is it presented?
Why is profit before financing and income taxes not simply a new name for the old 'profit before interest and tax'?
Why is there no separate goodwill impairment test for an associate?
Does IFRS 18 present 'integral' and 'non-integral' associates differently?
What are the TWO steps before an overseas subsidiary can be consolidated?
State the two translation rules, and the reason for each.
Do you translate only the overseas subsidiary's MONETARY assets and liabilities at the closing rate?
In which currency are the net assets, goodwill and non-controlling interests workings done for an overseas subsidiary — and what happens next?
Why is goodwill on an overseas acquisition treated as a foreign-currency asset, and what follows from that?
Set out the working for GROUP RETAINED EARNINGS when a subsidiary is overseas.
Where does the exchange difference on translating a foreign operation go, and what are its three components?
What is the one-line cross-check on the exchange difference on translation?
How is the exchange difference on translation attributed between the owners of the parent and the non-controlling interests?
What does IFRS 18 change for a foreign subsidiary — and what does it not?
What is the difference between an entity's functional currency and its presentation currency?
Holly paid Dinars 760m for 80% of Ivy, whose net assets had a fair value of Dinars 600m; NCI are at the proportionate share. What is goodwill at a closing rate of 4.3 Dinars to $1?
Ivy's 20% non-controlling interests were Dinars 120m at acquisition and Ivy's post-acquisition movement is Dinars 130m. What is the NCI figure in the group statement of financial position at a closing rate of 4.3?
Holly recorded its investment in Ivy, Dinars 760m, at $200m (rate 3.8). The closing rate is 4.3. What exchange difference arises on the investment, and where does it go?
Holly's own reserves are $110.0m; it owns 80% of Ivy (post-acquisition retained earnings Dinars 130m); the closing rate is 4.3 and the loss on the investment $23.3m. What is the single group reserves figure (W5)?
Ivy: opening net assets Dinars 600m, profit Dinars 130m, goodwill Dinars 280m; rates 3.8 at acquisition, 4.0 average, 4.3 closing. What is the exchange difference on translation?
Ivy's exchange loss is $20.6m on net assets and $8.6m on goodwill. Holly owns 80% and the NCI are measured at the proportionate share. How is the $29.2m attributed?
A rate is quoted as 4.3 Dinars to $1. Do you multiply or divide a Dinar figure to get dollars, and how do you sanity-check it?
A parent paid for an overseas subsidiary in its own currency. What must be done to the consideration before the goodwill working?
Holly's non-current assets are $200m and Ivy's Dinars 500m, plus a Dinars 100m fair value uplift on land at acquisition; the closing rate is 4.3. What are consolidated non-current assets?
Presented strictly under IAS 21, how is the Holly group's single reserves figure of $110.9m split?
What single idea explains everything that is different about a CONSOLIDATED statement of cash flows?
Under IAS 7 as amended by IFRS 18, where does the indirect method start, and which two classic add-backs disappear?
Under IAS 7 as amended, where do interest and dividends go in the statement of cash flows?
The IFRS 18 CATEGORIES and the IAS 7 HEADINGS are both called operating, investing and financing. Are they the same classification?
How do you find the dividend paid to the NON-CONTROLLING INTERESTS, and where does it go?
How do you find the dividend received from an ASSOCIATE, and where does it go?
What figure is reported when a group acquires or disposes of a subsidiary, and where?
Why can you not simply compare opening and closing balances in the year a subsidiary is acquired — and what do you do instead?
Goodwill has fallen over the year. Before you add the fall back as an impairment, what must you rule out?
A group disposes of a subsidiary at a gain. What is the test for whether the gain is adjusted in the indirect-method reconciliation?
A group's non-controlling interests rose from $110m to $115m and total comprehensive income attributable to them was $6m, with no acquisition or disposal. What dividend was paid to them, and where is it shown?
An investment in an associate rose from $180m to $190m and the group's share of its profit was $20m, with no other comprehensive income or impairment. What dividend was received, and where is it shown?
Pablo paid $50m in cash for all of the shares in Juan, which held $5m of cash and cash equivalents at the acquisition date. What appears in investing activities?
Pablo's inventories fell from $195m to $145m in the year it acquired Juan, whose inventories were $8m at acquisition. What figure goes in the reconciliation for inventories?
In the working capital working, which movements in inventories, receivables and payables are cash inflows?
Dove's goodwill fell from $1,230m to $1,184m in a year when it acquired Fred for $50m, with Fred's identifiable net assets at a fair value of $42m. What impairment of goodwill is added back?
Dove's deferred tax rose from $190m to $220m and its current tax payable from $110m to $150m, and the income tax expense was $95m. How much tax was paid?
Dove's property, plant and equipment rose from $1,250m to $1,745m. Fred brought in $13m, depreciation was $130m and assets with a carrying amount of $43m were sold, with no revaluation. What were the purchases?
Dove sold property, plant and equipment with a carrying amount of $43m for $50m, and the gain is included in operating profit. How does the sale appear in the statement of cash flows?
In Dove's statement, moving interest paid of $55m from operating to financing activities changes which figures, and which does it leave alone?
Which five figures do objective test questions on group cash flows almost always ask for?
What is the single test for whether a party is a related party of the reporting entity?
Under IAS 24's PERSON limb, when is a person (or a close member of their family) a related party of the reporting entity?
Who are CLOSE MEMBERS OF THE FAMILY of a person, as IAS 24 defines them?
Name IAS 24's four cases that are NOT related party relationships.
Which standard defines CONTROL, which defines JOINT CONTROL, and which defines SIGNIFICANT INFLUENCE for IAS 24 purposes?
What must be disclosed about the parent, even if there have been no transactions with it at all?
Key management personnel compensation is disclosed in total and for how many categories — and what are they?
Where there HAVE been related party transactions, what are the four minimum disclosures, and for which categories are they given?
Why does IAS 24 disclosure of intra-group transactions barely appear in a set of CONSOLIDATED financial statements?
Two loose ends that make good objective questions: when may an entity claim its related party transactions were at arm's length, and what relief exists for government-related entities?
How can a related party relationship distort an entity's reported figures even when nothing improper has happened?
A subsidiary has had no dealings at all with its parent this year. Why does IAS 24 still want the relationship disclosed?
Does a transfer between related parties have to carry a price to count as a related party transaction?
Who are key management personnel under IAS 24?
A parent controls a subsidiary and has significant influence over an associate. Are the subsidiary and the associate related parties of each other?
Two entities are both joint ventures of the same third party. Are they related to each other - and what if one is a joint venture and the other an associate of that third entity?
Apart from group companies, associates and joint ventures, which other entities does the entity limb make related parties?
Which one is a related party of CXZ: the wife of its finance director, a supplier of 35% of its purchases, a customer providing 60% of its revenue, or its bank providing an overdraft at market rates?
Does applying IAS 24 change any amount recognised in the financial statements?
State the basic earnings per share formula, and say exactly what goes on top.
Why is the denominator a WEIGHTED AVERAGE rather than the number of shares at the year end?
Three kinds of change to share capital. For each: is cash received, is a weighted average needed, are comparatives restated?
How do you compute the theoretical ex-rights price, and what do you then do with it?
Why are comparatives restated for a bonus issue and for the bonus element of a rights issue, but not for an issue at full market price?
State the diluted earnings per share formula and say what each adjustment is for.
How do you deal with (a) a convertible offering different terms at different dates, and (b) share options?
What is the dilution test, and what do you do when more than one class passes it?
How are the two figures presented — and is diluted EPS shown only when it is lower than basic?
What does IFRS 18 change for earnings per share from 1 January 2027?
Profit rose from $12,000 to $15,000, but a 1-for-1 rights issue doubled the shares from 100,000 to 200,000. What happened to earnings per share, and what does that show?
Ruth (year end 30 June) had 500m shares on 1 July, issued 50m more at full market price on 1 August, and made a profit of $250m. What is basic EPS?
Ruth had 500m shares and made a 1 for 4 bonus issue on 1 November; profit was $250m. What is basic EPS, and how is last year's EPS restated?
Ruth makes a 1 for 5 rights issue at $1.25 when the share price is $1.40. What are the theoretical ex-rights price and the rights issue fraction?
Ruth (year end 30 June) had 500m shares, made a 1 for 5 rights issue on 1 February with a fraction of $1.40 / $1.375, and made a profit of $250m. What is basic EPS?
Flanagan has $10m of 5% convertible loan stock, convertible at 125 or 120 shares per $100, and pays tax at 20%. What are the earnings and share adjustments for diluted EPS?
Flanagan has 100 million share options with an exercise price of $2.50, and the average share price for the year was $4.00. How many shares are added to the denominator for diluted EPS?
Flanagan's basic EPS is 50.0c on $500m and 1,000m shares. Its options add 37.5m shares and no earnings; its convertible adds $0.4m and 12.5m shares. What is fully diluted EPS?
Why may the earnings per share of two companies with similar trading not be comparable?
How can a company raise its earnings per share without earning any more, and what does that say about the measure?
Name the three standard-setting bodies for this chapter and say, for each, WHO it writes for.
Who owns the Integrated Reporting Framework now, and why is the IIRC the wrong answer?
What is the difference between the IASB and the ISSB?
Define integrated thinking, and distinguish it from integrated reporting.
Name the six capitals — and the trap in the list.
State four measurement and disclosure problems that apply to the capitals as a set.
List the seven Guiding Principles of the Integrated Reporting Framework.
List the eight Content Elements, and give the strongest benefit and the strongest limitation of the Framework.
State the objective and the scope of IFRS S1, and say where the disclosures are published.
What does IFRS S2 add to IFRS S1, and what are the four pillars and the three emission scopes?
Why do the financial statements leave out much of what makes an organisation valuable?
What are the three layers of the GRI Standards?
An organisation reporting under the GRI Standards explains how it manages each of its material topics. Is that one of the GRI 2 General Disclosures?
What does integrated thinking look like in practice inside an organisation?
Which capital does each of these belong to: a patent, the skills and experience of the workforce, the trust of the local community, and the water a factory draws from a river?
Why are staff turnover, training hours and engagement scores weak measures of human capital?
What makes natural capital hard to measure and report?
In the value creation process of the Integrated Reporting Framework, what is the difference between outputs and outcomes?
Which Guiding Principle answers the main fault of earlier narrative reporting, and how?
A matter is very important to a local community but could not plausibly affect the entity's cash flows, access to finance or cost of capital. Is it within IFRS S1?
A retailer's warehouse is flooded in a storm, and a new carbon tax raises its delivery costs. How does IFRS S2 classify each risk?
A company's own delivery vans burn diesel, it buys electricity for its stores, and its customers use its products. Which greenhouse gas emissions scope is each?
Name the four dimensions of the Gartner Data Analytics maturity model, the question each answers, and what the syllabus says they give you.
Give the five performance ratios, and say which numerator each takes from 2027.
Why is "PBIT" the wrong label from 2027, and when does it actually give a different number?
State the three working capital ratios — and the trap in the multiplier.
Before any liquidity ratio, what should you look at — and what are the two liquidity ratios?
What is capital employed — and why does the definition matter more than the choice?
Why can the gross profit margin move — and what can NEVER move it?
There is no ratio for ADAPTABILITY or for PROSPECTS. What evidence do you use instead?
What must a recommendation contain to earn marks, and what is the trap in recommending one?
Separate the DATA limitations from the LIMITATIONS OF COMPARABILITY — and name the one comparability limitation 2027 removes.
A supplier and a bank are reading the same set of accounts. Which ratios does each reach for first, and why?
Why is the net profit margin the least useful of the three margins?
The gross margin has risen but the operating margin has fallen. What does that tell you, and what might cause it?
SAF's receivables days rose from 72 to 101 while its payables days rose only from 73 to 90. What does this signal?
SAF has gone from $150,000 of cash to a short-term borrowing of $250,000 while its receivables days rose from 72 to 101. What did the analysis recommend?
DFG's profit before financing and income taxes is $22m and its finance costs are $12m. What is its interest cover, and how would a lender read it?
Morgan Co has $20m of 50c shares, profit for the year of $22,680,000, a dividend of 10.5c a share and a share price of $1.20. What are its EPS, dividend cover, dividend yield and P/E ratio?
Morgan Co has a high dividend yield of 8.75% and a price/earnings ratio of only 2.12. What does that combination suggest?
A food retailer's current ratio is below 1. Is that evidence of a liquidity problem?
Why does revaluing property reduce return on capital employed twice over?
What makes a ratio predictive or prescriptive, and what does a prescriptive one look like?
In a period of rising prices, how does valuing inventory on a first-in-first-out basis affect profit compared with an average-cost basis?
Card 1 of 420. Question side.