IFRS for SMEs Consolidation and Groups Flashcards

When is a parent entity required to present consolidated financial statements under IFRS for SMEs?

Answer: When it controls one or more subsidiaries, unless specific exemptions apply

Section 9 requires a parent entity to present consolidated financial statements when it controls one or more entities, with limited exemptions available such as when the parent is itself a subsidiary.

How should goodwill arising from a business combination be measured under IFRS for SMEs?

Answer: As the excess of acquisition cost over the acquirer's share of net identifiable assets, amortized over its useful life

Under Section 19, goodwill is measured as the excess of acquisition cost over the fair value of identifiable net assets acquired, then amortized over its estimated useful life (maximum 10 years if life cannot be reliably estimated).

What method should be used to account for investments in associates under IFRS for SMEs?

Answer: Cost model, equity method, or fair value model — the entity chooses one policy for all associates

Section 14 allows entities to choose between the cost model, equity method, or fair value through profit or loss for associates, but the chosen method must be applied consistently to all investments in associates.

How are intragroup transactions eliminated in consolidated financial statements under IFRS for SMEs?

Answer: All intragroup balances, transactions, income, and expenses are eliminated in full

Section 9 requires full elimination of intragroup balances, transactions, income, and expenses when preparing consolidated statements to present the group as a single economic entity.

What are the criteria for determining control of a subsidiary under IFRS for SMEs?

Answer: Power to govern the financial and operating policies of an entity to obtain benefits from its activities

Control exists when the parent has power to govern the financial and operating policies of an entity to obtain benefits, which is presumed when the parent owns more than half the voting power but can exist through other means.

How should a non-controlling interest be presented in consolidated financial statements?

Answer: Within equity, separately from the parent's equity

Non-controlling interests are presented in the consolidated statement of financial position within equity, separately from the equity of the parent, showing the portion of net assets attributable to minority shareholders.