Financial Reporting Flashcards
6 cards from real ACA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Reporting flashcards as text
Under IFRS, how is a subsidiary's pre-acquisition profit treated in the consolidated retained earnings?
Answer: Excluded — only post-acquisition profits are included in consolidated retained earnings
On consolidation, only the parent's share of post-acquisition profits of the subsidiary is included in consolidated retained earnings. Pre-acquisition profits form part of the net assets at the acquisition date.
Under IAS 21, monetary items denominated in a foreign currency are retranslated at the closing rate. Any exchange difference is recognised in:
Answer: Profit or loss
Exchange differences on monetary items (such as foreign currency debtors, creditors, and loans) are recognised in profit or loss in the period they arise, under IAS 21.
In a consolidated statement of financial position, goodwill arising on acquisition is classified as:
Answer: An intangible non-current asset
Goodwill on acquisition is classified as an intangible non-current asset on the consolidated balance sheet and is subject to annual impairment testing under IFRS 3 / IAS 36.
When an entity disposes of a foreign operation, cumulative exchange differences previously recognised in OCI are:
Answer: Reclassified to profit or loss on disposal
IAS 21 requires cumulative exchange differences in the translation reserve relating to a foreign operation to be reclassified (recycled) to profit or loss when the operation is disposed of.
Under IFRS 3, acquisition-related costs (e.g., legal fees) are:
Answer: Expensed as incurred in profit or loss
IFRS 3 requires acquisition-related costs (due diligence, legal, advisory fees) to be expensed as incurred; they are not part of the consideration or goodwill calculation.
Which of the following disclosures is required under IFRS 7 for financial instruments?
Answer: The nature and extent of risks arising from financial instruments and how they are managed
IFRS 7 requires disclosures about the significance of financial instruments, the nature and extent of credit, liquidity, and market risk exposures, and how management manages those risks.