Deck 23: Operating Segments

Question 1

A government entity controls both Edward Limited and Jacob Limited. Bella Limited and Jasper Limited are the subsidiaries of Edward Limited. Carlisle Cullen is the managing director of Edward Limited. Edward Limited can apply the partial exemption of disclosures in paragraph 25 of AASB 124 to transactions with the following parties, except for:

A) Carlisle Cullen;
B) Jacob Limited;
C) Bella Limited;
D) the government entity.

Answer 1

A

Question 2

AASB 124:

A) prescribes how transactions with related parties are to be measured;
B) defines the recognition criteria of related party transactions;
C) explains the format of financial statements of entities with related parties;
D) deals purely with related party disclosures.

Answer 2

D

Question 3

Examples of related party transactions that must be disclosed include:

A) settlement of liabilities;
B) disposal of assets;
C) purchase or sales of goods;
D) all of the above.

Answer 3

D

Question 4

Willow Limited and Rupert Limited are the two subsidiaries of Buffy Company. Dan Sanders, one of the directors of Buffy Company, is also a director of Rupert Limited. Dan's wife, Sandra, has 10% of shareholding in Rupert Limited. Which of the followings are related parties to Willow Limited?

A) Buffy Company and Dan Sanders;
B) Buffy Company and Rupert Limited;
C) Rupert Limited and Dan Sanders;
D) Dan Sanders and Sandra Sanders.

Question 5

Disclosure of related parties is essential in financial reporting because:

A) related parties cannot be trusted;
B) there are certain limits imposed on entities in regards to how many related party transactions they could have;
C) related parties have the potential to affect an entity's profit or loss and financial position that might not otherwise occur;
D) a high number of corporate collapses are caused by related party transactions.

Question 6

Two entities are not regarded as related parties simply because:

A) one entity is a post- employment benefit plan for the other entity;
B) one entity is a subsidiary of the other entity;
C) a member of the key management personnel of one entity controls the other entity;
D) a member of the key management personnel of one entity has significant influence over the other entity.

Question 7

The latest version of AASB 124 is applicable for annual reporting periods commencing on or after:

A) 1^st January 2009;
B) 1^st January 2010;
C) 1^st January 2011;
D) 1^st January 2012.

Question 8

An entity in which an investor has significant influence is known as:

A) a joint venture;
B) a related party;
C) a subsidiary;
D) an associate.

Question 9

According to AASB 124, related party disclosures are required irrespective of whether there have been related party transactions when:

A) significant influence exists;
B) control exists;
C) economic dependence exists;
D) all of the above.

Question 10

Which of the following is the related party of a reporting entity within the scope of AASB 124?

A) The domestic partner of a director of the reporting entity.
B) A supplier of the reporting entity.
C) The non-dependent children of the reporting entity's CEO.
D) Another subsidiary of the reporting entity's parent.

Question 11

Aladdin is the owner and founder of Genie Limited. Aladdin's wife, Jasmine, has a controlling investment in Jafar Limited. Which of the followings describes the relationship between Genie Limited and Jafar Limited?

A) Genie Limited and Jafar Limited are not related parties.
B) No disclosure about transactions with Jafar Limited is required in the financial statements of Genie Limited.
C) Genie Limited is a related party of Jafar Limited.
D) Genie Limited has control over Jafar Limited.

Question 12

In the case where financial statements of parent entity or the ultimate controlling entity are not made publicly available, the reporting entity must disclose:

A) the name of the entity's largest shareholder;
B) the name of the next most senior parent entity whose financial statements are publicly available;
C) the reason of why the parent entity does not make its financial statements publicly available;
D) the level of share ownership of the next most senior parent entity.

Question 13

The following remuneration categories must be disclosed for key management personnel, except for:

A) termination benefits;
B) post-employment benefits;
C) bonus payments;
D) share-based payments.

Question 14

The power to participate in the financial and operating policy decisions of an entity is known as:

A) control;
B) significant influence;
C) share ownership;
D) joint control.

Question 15

John Berry is one of the non-executive directors of Monash Company. In this current financial year, Monash Company had transactions with the following entities:
I) Borrowed money from ABC Bank.
II) Purchased raw materials from Deakin Company.
III) Loaned money to one of its subsidiaries, Swinburne Company, with 10% per annum.
IV) Sold products to Melbourne Company, of which John Berry is also a director.
Which transactions are not related party transactions between Monash Company and another entity?

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

Question 16

An entity is related to a reporting entity if any of the following conditions apply, except:

A) the reporting entity has significant economic dependence on the entity;
B) both entities are joint venture of the same third party;
C) the entity is the subsidiary of the reporting entity;
D) the entity is a post-employment benefit plan for the reporting entity's employees.

Question 17

Jon holds an investment in Voight Limited that gives him a significant influence over the company. Jon's daughter, Angelina, also has a significant influence over another entity, Jolie Limited. What is the relationship between Voight Limited and Jolie Limited?

A) Voight Limited is a related party of Jolie Limited.
B) Voight Limited has a significant influence over Jolie Limited.
C) Voight Limited and Jolie Limited are not related parties.
D) Voight Limited has control over Jolie Limited.

Question 18

The scope of AASB 124 states that AASB 124 shall be applied in identifying the followings, except for:

A) outstanding balances, including commitments, between an entity and its related parties;
B) insider trading with related parties;
C) circumstances in which disclosures of transactions with related parties are required;
D) related party relationships and transactions.

Question 19

Galaxy Limited is a listed company operating in retail industry with three business units: Milky Way, Andromeda, and Whirlpool. Which of the followings is likely to be the key management personnel of Galaxy Limited?

A) The general manager of Milky Way;
B) The managing director's personal assistant;
C) The company's auditor;
D) The company's IT manager.

Question 20

Maria is one of the directors in Leo Limited, which is one the subsidiaries of Aries Limited. She also has a joint control with Mimi in Virgo Limited. In this circumstance, the followings are related parties to Leo Limited, except for:

A) Mimi;
B) Maria;
C) Aries Limited;
D) Virgo Limited.

Question 21

Drew is one of the directors of Mellor Limited. In the current financial year, Mellor Limited paid $50 000 to Advice Agency, where Drew's brother works, for the consultancy services it provided. In addition, Mellor Limited also paid $2000 to Drew for a once-off consultancy he provided on a specific project. Which of the following statements describes the relationship between Drew, Mellor Limited, and Advice Agency?

A) Advice Agency is a related party to Mellor Limited.
B) Drew is not a related party to Mellor Limited.
C) The $50 000 consultancy fee is not a related party transaction.
D) The $2000 consultancy fee is not a related party transaction.

Question 22

David is the general manager of Awesome Limited and is considered to be the member of key management personnel. The following transactions occurred between David and Awesome Limited:
David purchased a product of Awesome Limited on normal trading terms;
David received remuneration from Awesome Limited amounting to $100 000;
Awesome Limited issued 20 000 options to David, which can be converted into Awesome Limited's shares if target profit margin of 25% is achieved in the next three years.
Which of the above transactions must be disclosed as related party transactions?

A) The purchase of product and David's remuneration.
B) David's remuneration and the grant of options.
C) The purchase of product and the grant of options.
D) All of the above transactions are related party transactions.

Question 23

Which of the followings are most likely to be considered as key management personnel of an entity?
$\begin{array}{|l|l|l|l|}\hline \text { I. } & \text { Chief Financial Officer } & \text { III. } & \text { Non-executive directors } \\\hline \text { II. } & \text { Admin Officer } & \text { IV. } & \text { General manager } \\\hline\end{array}$

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

Question 24

The minimum disclosures for related party transactions include the followings, except:

A) provision of doubtful debts related to outstanding balances;
B) the amount of transactions;
C) the amount of the outstanding balances and commitments;
D) the key management personnel of the related party.

Question 25

If an entity chooses to apply the disclosure exemption in paragraph 25 of AASB 124, it is still required to do the followings, except:

A) disclose the nature of the relationship with the government-related entities;
B) identify the government to which it is related;
C) the nature and amount of every transaction with government-related entities;
D) a qualitative or a quantitative indication of the extent of other transactions that are collectively significant.

Question 26

Which of the following transactions are not related party transactions for an entity?
$\begin{array}{|l|l|l|l|}\hline \text { I. } & \begin{array}{l}\text { An employee purchased the entity's } \\\text { products on normal trading terms. }\end{array} & \text { III. } & \begin{array}{l}\text { A subsidiary of the entity supplied } \\\text { raw materials to the entity. }\end{array} \\\hline \text { II. } & \begin{array}{l}\text { The entity made an agreement with a } \\\text { trade union about increase in } \\\text { employee's wages. }\end{array} & \text { IV. } & \begin{array}{l}\text { The entity lent money to one of its } \\\text { directors. }\end{array} \\\hline\end{array}$

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

Question 27

Harry is a non-executive director of Potter Limited and Hogwarts Limited. Harry's wife, Ginny, is a non-executive director of Weasley Limited. Which of the following statements is correct?

A) Harry is not a related party to Potter Limited.
B) Potter Limited and Hogwarts Limited are not related parties.
C) Ginny is a related party to Hogwarts Limited.
D) Potter Limited and Weasley Limited are related parties.

Question 28

Metro Limited is a subsidiary of Matrix Limited. Which of the followings is not a related party to Metro Limited?

A) A pension scheme that offers benefits to employees of Metro Limited.
B) The Managing Director of Matrix Limited.
C) An associate of Metro Limited.
D) A distributor of Metro Limited's products.

Question 29

The contractually agreed sharing of control over an economic entity is known as:

A) significant influence;
B) significant control;
C) joint control;
D) joint venture.

Question 30

VicEd is a government agency that controls Science Limited. Science Limited has two subsidiaries: Bio Limited and Chem Limited. To which entities can Bio Limited apply the disclosure exemption in paragraph 25 of AASB 124?

A) VicEd Limited only;
B) Science Limited only;
C) Science Limited and Chem Limited only;
D) VicEd Limited, Science Limited, and Chem Limited.