Consolidation and Group Accounts Flashcards

Under IFRS 11, a joint arrangement is classified as a joint operation when:

Answer: Parties have rights to the assets and obligations for the liabilities of the arrangement

In a joint operation, each operator recognises its own share of assets, liabilities, revenues, and expenses.

Under IFRS 3, acquisition-related costs (e.g., advisory fees) in a business combination are:

Answer: Expensed as incurred

IFRS 3 requires acquisition costs (legal, advisory fees) to be expensed in the period incurred.

Under IFRS 10, intra-group transactions are eliminated on consolidation because:

Answer: Consolidated statements present the group as a single economic entity

Consolidation eliminates intra-group balances, transactions, and unrealised profits to present the group as one entity.

Under IFRS 3, the acquisition method requires the acquirer to be identified based on:

Answer: Which entity obtains control over the other

The acquirer is the entity that obtains control as defined by IFRS 10.

Under IAS 28, when using the equity method, how is an investor's share of a loss recognised when it exceeds the carrying amount of the investment?

Answer: The investor stops recognising further losses unless it has incurred obligations on behalf of the investee

IAS 28 limits equity method losses to the investment's carrying amount (including long-term interests) unless the investor has obligations.

Under IFRS 10, when a parent loses control of a subsidiary, it recognises:

Answer: A gain or loss equal to the difference between proceeds received plus fair value of retained interest less the derecognised net assets

IFRS 10 requires recognition of the disposal gain/loss including the fair value of any residual interest retained.