Exam 1: Text Objectives and Introduction to Consolidation

Explain why percentage of ownership an investor has in an investee is not the only consideration when determining which entities must create financial statements.

Assume that Scipio Ltd has a controlling interest in Africanus Ltd.As a result of this relationship:

One of the advantages of forming a group is the potential for reducing legal liability.

What are the major criticisms of the control criterion applied to the definition of the group?

A reporting entity is a single entity that meets certain criteria.

Company B is bound by contract to sell all its output to Company A.Company A is deemed to control Company B.

Joint control can exist where share ownership by investing companies is not equal.

If a parent entity is a reporting entity the group must also be a reporting entity.

Discuss the requirements for the preparation of separate financial statements under AASB 127.

Discuss the concepts of 'shared control' and 'joint control' in relation to the requirements of Accounting Standard AASB 127.

A trust cannot be an entity.