Question 1

For the purpose of preparing consolidated financial statements, a group is made out of:

Accepted Answer

A)  one parent entity and one subsidiary entity. 
B)  one or more parent entities and all their subsidiary entities. 
C)  one parent entity and all its subsidiary entities. 
D)  one or more parent entities and one subsidiary entity that they commonly control. 
A)  one parent entity and one subsidiary entity. 
B)  one or more parent entities and all their subsidiary entities. 
C)  one parent entity and all its subsidiary entities. 
D)  one or more parent entities and one subsidiary entity that they commonly control. C

Question 2

When deciding whether or not one entity controls another entity:

Accepted Answer

A)  the controlling entity must have exercised its power to control. 
B)  it is sufficient that the controlling entity has the capacity to control. 
C)  the controlling entity must be actively involved in the decision making of the other entity. 
D)  the controlling entity must have exerted its control over the financing policies of the other entity. 
A)  the controlling entity must have exercised its power to control. 
B)  it is sufficient that the controlling entity has the capacity to control. 
C)  the controlling entity must be actively involved in the decision making of the other entity. 
D)  the controlling entity must have exerted its control over the financing policies of the other entity. B

Question 3

The equity in a subsidiary not attributable to a parent is known as a/an:

Accepted Answer

A)  non-controlling interest. 
B)  attributable interest. 
C)  non-parent interest. 
D)  external interest. 
A)  non-controlling interest. 
B)  attributable interest. 
C)  non-parent interest. 
D)  external interest. A

Question 4

The entity that is represented by a single set of consolidated financial statements is:

Accepted Answer

A)  a parent entity. 
B)  a subsidiary entity. 
C)  a legal entity. 
D)  an economic entity. 
A)  a parent entity. 
B)  a subsidiary entity. 
C)  a legal entity. 
D)  an economic entity.

Question 5

Examples of rights that determine the existence of power include:

Accepted Answer

A)  rights to appoint, reassign or remove members of an investee's key management personnel 
B)  rights to appoint or remove another entity that participates in management decisions. 
C)  rights to direct the investee to enter into, or veto any changes to, transactions that affect the investee's returns. 
D)  all of the options are correct. 
A)  rights to appoint, reassign or remove members of an investee's key management personnel 
B)  rights to appoint or remove another entity that participates in management decisions. 
C)  rights to direct the investee to enter into, or veto any changes to, transactions that affect the investee's returns. 
D)  all of the options are correct.

Question 6

In the context of control, relevant activities are:

Accepted Answer

A)  activities of the investor that significantly affect the investor's returns. 
B)  activities of the investee that significantly affect the investee's returns. 
C)  activities of the investor that significantly affect the investee's returns. 
D)  activities of the investor that are similar to the investee's activities. 
A)  activities of the investor that significantly affect the investor's returns. 
B)  activities of the investee that significantly affect the investee's returns. 
C)  activities of the investor that significantly affect the investee's returns. 
D)  activities of the investor that are similar to the investee's activities.

Question 7

Kowloon Limited is an entity listed in Hong Kong. Kowloon Limited holds a 100% investment in Aussie Pty Ltd, an Australian based company, who in turn holds a 90% interest in Skippy Pty Ltd. Aussie Pty Ltd and the Aussie group (comprising Aussie and Skippy) are both non-reporting entities. Which of the following statements is correct?

Accepted Answer

A)  Aussie Pty Ltd will be required to prepare consolidated financial statements as the ultimate Australian parent. 
B)  Aussie Pty Ltd will not be required to prepare consolidated financial statements as they are a non-reporting entity. 
C)  Aussie Pty Ltd will be required to prepare consolidated financial statements only if directed to do so by ASIC. 
D)  Aussie Pty Ltd will not be required to prepare consolidated financial statements as Kowloon is a listed foreign entity. 
A)  Aussie Pty Ltd will be required to prepare consolidated financial statements as the ultimate Australian parent. 
B)  Aussie Pty Ltd will not be required to prepare consolidated financial statements as they are a non-reporting entity. 
C)  Aussie Pty Ltd will be required to prepare consolidated financial statements only if directed to do so by ASIC. 
D)  Aussie Pty Ltd will not be required to prepare consolidated financial statements as Kowloon is a listed foreign entity.

Question 8

AASB 10/IFRS 10 Consolidated Financial Statements defines a 'parent' and a 'subsidiary' as which of the following?

Accepted Answer

A)  I. 
B)  II. 
C)  III. 
D)  IV. 
A)  I. 
B)  II. 
C)  III. 
D)  IV.

Question 9

An agent is:

Accepted Answer

A)  a party primarly engaged to act for its own benefit. 
B)  a party primarly engaged to act for the benefit of another party. 
C)  a party primarly engaged to act for its own benefit and therefore controls the investee when it exercises its decision-making authority. 
D)  a party primarly engaged to act for the benefit of another party and therefore does not control the investee when it exercises its decision-making authority. 
A)  a party primarly engaged to act for its own benefit. 
B)  a party primarly engaged to act for the benefit of another party. 
C)  a party primarly engaged to act for its own benefit and therefore controls the investee when it exercises its decision-making authority. 
D)  a party primarly engaged to act for the benefit of another party and therefore does not control the investee when it exercises its decision-making authority.

Question 10

In the context of control, examples of relevant activities include:

Accepted Answer

A)  selling and purchasing goods and services. 
B)  managing financial assets. 
C)  determining a funding structure or obtaining funding. 
D)  all of the options are correct. 
A)  selling and purchasing goods and services. 
B)  managing financial assets. 
C)  determining a funding structure or obtaining funding. 
D)  all of the options are correct.

Question 11

According to AASB 10/IFRS 10 Consolidated Financial Statements, all parent entities are required to present consolidated statements unless which of the following conditions apply to them?
I The parent is a wholly owned subsidiary.
II The parent is a partly owned subsidiary and its other 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.

Accepted Answer

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

Question 12

According to AASB 10/IFRS 10 Consolidated Financial Statements, which of the following factors indicate the existence of control?

Accepted Answer

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

Question 13

Protective rights include:

Accepted Answer

A)  a lender's right to restrict a borrower from undertaking activities that could significantly change the credit risk of the borrower to the detriment of the lender. 
B)  the right of a party holding a non-controlling interest in an investee to approve capital expenditure greater than that required in the ordinary course of business, or to approve the issue of equity or debt instruments. 
C)  the right of a lender to seize the assets of a borrower if the borrower fails to meet specified loan repayment conditions. 
D)  all of the options are correct. 
A)  a lender's right to restrict a borrower from undertaking activities that could significantly change the credit risk of the borrower to the detriment of the lender. 
B)  the right of a party holding a non-controlling interest in an investee to approve capital expenditure greater than that required in the ordinary course of business, or to approve the issue of equity or debt instruments. 
C)  the right of a lender to seize the assets of a borrower if the borrower fails to meet specified loan repayment conditions. 
D)  all of the options are correct.

Question 14

The process of preparing consolidated financial statements requires that:

Accepted Answer

A)  the individual financial statements of the parent and all its subsidiaries use uniform accounting policies for like transactions and other events in similar circumstances. 
B)  the individual financial statements of the parent and all its subsidiaries use uniform accounting practices for like transactions and other events in similar circumstances. 
C)  the subsidiaries must prepare, if practicable, financial information as of the same date and for the same period as the financial statements of the parent. 
D)  the individual financial statements of the parent and all its subsidiaries use uniform accounting policies for like transactions and other events in similar circumstances and that the subsidiaries must prepare, if practicable, financial information as of the same date and for the same period as the financial statements of the parent. 
A)  the individual financial statements of the parent and all its subsidiaries use uniform accounting policies for like transactions and other events in similar circumstances. 
B)  the individual financial statements of the parent and all its subsidiaries use uniform accounting practices for like transactions and other events in similar circumstances. 
C)  the subsidiaries must prepare, if practicable, financial information as of the same date and for the same period as the financial statements of the parent. 
D)  the individual financial statements of the parent and all its subsidiaries use uniform accounting policies for like transactions and other events in similar circumstances and that the subsidiaries must prepare, if practicable, financial information as of the same date and for the same period as the financial statements of the parent.

Question 15

For the purposes of consolidated financial statements, a group is made out of:

Accepted Answer

A)  an investor and its investees. 
B)  a parent entity and all its subsidiaries. 
C)  an entity that has one or more subsidiaries. 
D)  an entity that is controlled by a parent. 
A)  an investor and its investees. 
B)  a parent entity and all its subsidiaries. 
C)  an entity that has one or more subsidiaries. 
D)  an entity that is controlled by a parent.

Question 16

Where the financial statements of a subsidiary are as of a date that differs from that of the parent, the group must disclose:

Accepted Answer

A)  the date used by the subsidiary. 
B)  the reason for the subsidiary using a different date. 
C)  both the date used by the subsidiary as well as the reason for the subsidiary using a different date. 
D)  the reason for the parent using a different date. 
A)  the date used by the subsidiary. 
B)  the reason for the subsidiary using a different date. 
C)  both the date used by the subsidiary as well as the reason for the subsidiary using a different date. 
D)  the reason for the parent using a different date.

Question 17

The key characteristic that determines when consolidated financial statements should be prepared is:

Accepted Answer

A)  the existence of transactions between the entities. 
B)  control. 
C)  substance over form. 
D)  significant influence. 
A)  the existence of transactions between the entities. 
B)  control. 
C)  substance over form. 
D)  significant influence.

Question 18

The process of preparing consolidated financial statements requires that:

Accepted Answer

A)  no adjustments be made to the individual financial statements or ledger accounts of the entities in the group. 
B)  adjusting journal entries be recorded in the ledger accounts of the subsidiaries only. 
C)  accruals of expenses and revenues be recorded directly into the retained earnings account of the parent entity. 
D)  adjusting journal entries be recorded in the ledger accounts of the parent only. 
A)  no adjustments be made to the individual financial statements or ledger accounts of the entities in the group. 
B)  adjusting journal entries be recorded in the ledger accounts of the subsidiaries only. 
C)  accruals of expenses and revenues be recorded directly into the retained earnings account of the parent entity. 
D)  adjusting journal entries be recorded in the ledger accounts of the parent only.

Question 19

A group may:

Accepted Answer

A)  only have one parent. 
B)  have more than one parent. 
C)  have a few different sub-groups. 
D)  only have one parent, but it may have a few different sub-group. 
A)  only have one parent. 
B)  have more than one parent. 
C)  have a few different sub-groups. 
D)  only have one parent, but it may have a few different sub-group.

Question 20

At balance date, Company A has 40% of the voting rights in Company B. In addition Company A holds potential voting rights in Company B amounting to 6% that are currently exercisable, and a further 9% of voting rights in Company B that can be exercised in two years' time. Which of the following statements is correct?

Accepted Answer

A)  Consolidated financial statements must be prepared for Company A and B in the current year. 
B)  Consolidated financial statements need not be prepared for Company A and B for the current year. 
C)  Consolidated financial statements must be prepared as Company A controls Company B at balance date. 
D)  Consolidated financial statements must be prepared as Company A has more than half of the voting rights in Company B at balance date. 
A)  Consolidated financial statements must be prepared for Company A and B in the current year. 
B)  Consolidated financial statements need not be prepared for Company A and B for the current year. 
C)  Consolidated financial statements must be prepared as Company A controls Company B at balance date. 
D)  Consolidated financial statements must be prepared as Company A has more than half of the voting rights in Company B at balance date.

Exam 26: Consolidation: Controlled Entities

For the purpose of preparing consolidated financial statements, a group is made out of:

When deciding whether or not one entity controls another entity:

The equity in a subsidiary not attributable to a parent is known as a/an:

The entity that is represented by a single set of consolidated financial statements is:

Examples of rights that determine the existence of power include:

In the context of control, relevant activities are:

AASB 10/IFRS 10 Consolidated Financial Statements defines a 'parent' and a 'subsidiary' as which of the following?

An agent is:

In the context of control, examples of relevant activities include:

According to AASB 10/IFRS 10 Consolidated Financial Statements, which of the following factors indicate the existence of control?

Protective rights include:

The process of preparing consolidated financial statements requires that:

For the purposes of consolidated financial statements, a group is made out of:

Where the financial statements of a subsidiary are as of a date that differs from that of the parent, the group must disclose:

The key characteristic that determines when consolidated financial statements should be prepared is:

The process of preparing consolidated financial statements requires that:

A group may:

Accounting Regulation and the Conceptual Framework

Application of Accounting Theory

Fair Value Measurement

Inventories

Property, Plant and Equipment

Intangible Assets

Impairment of Assets

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Leases

Financial Instruments

Income Taxes

Share Capital and Reserves

Share-Based Payment

Revenue

Presentation of Financial Statements

Statement of Cash Flows

Accounting Policies and Other Disclosures

Earnings Per Share

Operating Segments

Related Party Disclosures

Sustainability and Corporate Social Responsibility Reporting

Foreign Currency Transactions and Forward Exchange Contracts

Translation of Foreign Currency Financial Statements

Business Combinations

Consolidation: Wholly Owned Entities

Consolidation: Intragroup Transactions

Consolidation: Non-Controlling Interest

Consolidation: Other Issues

Associates and Joint Ventures

Joint Arrangements

Insolvency and Liquidation

Accounting for Mineral Resources

Agriculture

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