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Exam 16: Consolidation: Controlled Entities

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Question 1

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Which is not one of the three elements of control?

A) the ability to use power over the investee to affect the amount of the investor's returns;
B) holding majority voting rights;
C) power over the investee;
D) exposure, or rights, to variable returns from involvement with the investee.

E) None of the above
F) A) and B)

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Question 2

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According to IFRS 10, which of the following factors indicate the existence of control? I. Possessing existing rights that give the current ability to direct the relevant activities. II) Shared power in the governance of financial and operating policies of another entity so as to obtain benefits. III) The power to govern the operating policies of an entity so as to obtain benefits. IV) Ownership of more than 50% of the voting power in the subsidiary.

A) I, II and III only;
B) I and IV only;
C) II and IV only;
D) IV only.

E) B) and C)
F) A) and C)

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Question 3

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If an investor entity owns more than half of the voting or potential voting power of an investee and does not account for the investment as a subsidiary, IFRS 12 requires the following disclosure:

The key criterion for the consolidation of the separate financial statements of entities is:

A group of entities formed by A Limited (parent entity) , B Limited (subsidiary entity) and C Limited (subsidiary entity) has the following Trade Receivables balances: $\bullet$ A Limited $12 000 $\bullet$ B Limited $15 000 $\bullet$ C Limited $10 000 The consolidated financial statements show the following amount as the consolidated Trade Receivables balance:

A Ltd is a listed public company and has an 80% controlling interest in B Pty Ltd. B Pty Ltd is the parent of C Pty Ltd. In which of the following situations will B Pty Ltd not be required to prepare consolidated financial statements?

According to IFRS 12, parent entities are required to disclose: I. Summarised financial information about each subsidiary. II) A list of significant investments in subsidiaries. III) If the subsidiary is not wholly owned, the names of all other members. IV) The country of incorporation of subsidiaries.

For one entity to control another entity, the percentage of share ownership held by the controlling entity:

All parent entities are required to present consolidated statements unless the following conditions apply to them: I. The parent is a wholly owned subsidiary. II) The parent is a partly owned subsidiary and its owners do not object to the non-presentation of consolidated financial statements. III) The parent's debt or equity securities are traded in a public market. IV) The parent is not in the process of applying to issue any securities in a public market.

Control is automatically presumed to exist where the parent either directly or indirectly through subsidiaries owns:

Two entities A Limited and B Limited together form a third entity, C Limited. C Limited acquires A Limited and B Limited. According to IFRS 3 Business Combinations:

Which of the following statements applies to reverse acquisitions? $\begin{array} { | l | l | l | l | } \hline \text { I. } & \begin{array} { l } \text { The accounting acquirer would } \\\text { issue equity shares to the } \\\text { accounting acquire. }\end{array} & \text { III. } & \begin{array} { l } \text { The legal subsidiary has the power to govern } \\\text { the financial and aperating policies of the } \\\text { combined entity. }\end{array} \\\hline \text { II. } & \begin{array} { l } \text { The legal acquirer is identified } \\\text { as accounting acquiree. }\end{array} & \mathrm { IV } . & \begin{array} { l } \text { Consolidated financial statements prepared } \\\text { following a reverse acquisition are issued } \\\text { under the name of the accounting acquirer. }\end{array} \\\hline\end{array}$

In a consolidated group of entities, control over the subsidiaries in the group:

In a business combination:

For the purposes of consolidated financial reporting, a group is:

The process of preparing the combined financial statements of a group of entities is known as:

If a parent entity chooses not to prepare consolidated financial statements, IAS 27 Separate Financial Statements requires the following disclosures in the separate financial statements of the parent: I. The name, country of residence and voting power of the directors of the parent. II) That the exemption from consolidation has been used. III) A list of significant investments including the proportion of ownership. IV) A description of the method used to account for the investments.

The process of aggregating individual sets of financial statements to produce consolidated financial statements requires:

If a controlling entity has delegated control to another entity, the parent is deemed to be:

When one entity controls the business operations of another entity, the business combination results in the following type of relationship: