Ans. This is because, although we have used OTs to demonstrate how the consolidation principles could be examined, they could also be assessed using the MTQs in part B of the exam. Financial Reporting and Analysis Interview Questions & Answers Financial Reporting and Analysis is a part of the financial analysis to depict financial health of the company. common stock, additional paid-up capital and retained earnings) and the investment in subsidiary account as it appears in the individual financial statements of the parent. question says Alice bought 90% of Bertha. C 1 and 3 only However, ABC also controls five subsidiaries, which in turn have revenues of $50,000,000 and assets of $82,000,000. The question is on Section 2 which is consolidated statements. Exam Financial Statement Analysis, Questions and Answers rn. CPA Joseph Chacha. The Paper FA syllabus is limited to the definition and identification of an Associate and describing the principle of equity accounting only. re-read the question to ensure you understand it and check you are answering the question set if your initial calculation does not match any of the answer options. ... questions CAC11012009 04 Financial Accounting IA Sample/practice exam 6 December 2009, questions Ifrs 10 consolidated financial statements summary ACCA - F3 Financial Accounting - Study Text 2016-2017. The following extracts are from the individual statements of profit or loss of the two companies for the year ended 30 September 20X2: Purple Co had made sales to Silver Co during the year of $5,000. By looking at the ability to appoint directors shows that Indigo Co has four of the six directors, effectively giving them power and therefore control over the decision making in the company. C Violet and Black What should be the consolidated revenue for the year ended 30 September 20X2? The accompanying notes to the financial statements, on pages 9 to 40, are an integral part of this statement. B $95,230 Inventory (SoFP)             $500. Download. A group is made up of a parent and its subsidiary. What should be shown as the consolidated figure for receivables and payables? Note: Red Co has only acquired 80% of Blue Co’s shares, so consideration transferred is 80% x 40,000 = 32,000 x $3.50 = $112,000. Let's connect! Guide to Financial Statement Analysis. ... Ex-post errors are likely. Violet Co – by looking at the equity shares, Green Co has more than 50% of the voting shares – ie an 80% equity holding. Payables         ($70,000 + $42,000 – $4,600) = $107,400. We began this article with consideration of how to identify a subsidiary, and we conclude it with consideration of a relationship between a parent and an associate. The fair value of net assets of the Company B at the time of acquisition was $40 million. Presentation of income under IFRS Trends in use and presentation of non-GAAP income measures in IFRS financial statements. This is consistent with the treatment of other assets and the concept of control. Download Full PDF Package. It’s with Alice and Bertha. Financial Statement. For an associate we have to use the equity method, which means we simply bring in our share of the associate’s results. This is because the consolidated statement of profit or loss needs to show revenue and costs of sales which reflects group performance with external, non-group, entities. Sample/practice exam 2017, questions and answers. Consolidated financial statements are the financial statements of an economic entity in which the assets, liabilities, equity, revenuenet assets/, expenses and cash flows of the controlling entity and its controlled entities are presented as those of a single economic entity. Impairment guidance Guidance includes: • Questions and answers on impairment of Statement (3): Don’t just look at the 45% holding and presume it is an associate without considering the other facts. This is why we need to include the fair value of the non-controlling interest in our goodwill calculation. Meld je aan of registreer om reacties te kunnen plaatsen. Consolidation worksheet helps in the simulation consolidation required at each reporting date. The group statement of financial position should only include amounts owed and owing to entities outwith the group. Download Full PDF Package. An associate is defined by IAS 28, Investments in Associates and Joint Ventures as ‘an entity over which the investor has significant influence’. Group statement of profit and loss Chapter 25. 37 Full PDFs related to this paper. Let’s consider each of the investments in turn to determine if control exists and, therefore, if they should be accounted for as a subsidiary. As Pink Co shows a receivable of $4,600, then in Scarlett Co’s individual accounts there must be a corresponding payable of $4,600. C $108,700 Consolidated statement of financial position Chapter 24. From the question, we can see that Pink Co has control over Scarlett Co. Investment in Company B (in books of Company A). Having power and control should make you spot that actually Red Co is a subsidiary and, therefore, would be consolidated line by line in the group accounts and would not be equity accounted. Associates (IAS 28) We’ve also published numerous other types of interview guides. Our objective in preparing the example financial statements was to illustrate one possible approach to financial reporting by an entity engaging in transactions that are ‘typical’ across a range of non-specialist sectors. You should ensure you have looked at the specimen paper (the full exam amd the additional MTQs) for practice of the fuller consolidation exam questions. Question: The Accounting Treatment Of Consolidated Financial Statements Is An Example Of The Application Of The Substance Over Form Principle. provision of essential technical information. Consolidated financial statements provide a comprehensive overview of a company's operations. This is simply because we do not have control. Consolidated financial statements are financial statements of a group in which assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity. Consolidated financial statements should be prepared when theparent company has control over the subsidiary. This should make you conclude that Black Co is a subsidiary. Financial Statement are end result of financial accounting. If you’d like to keep learning with free CFI resources, we highly recommend these additional guides to improve your financial statement analysis: You should look at the specimen paper and extra MTQs available on the ACCA website. We hope this guide on the analysis of financial statements has been a valuable resource for you. Q.1 On 1 April 2011, Pyramid acquired 80% of Squares equity shares by means of an immediate share exchange and a cash payment of 88 cents per acquired share, deferred until 1 April 2012. A Violet only IFRS 10 sets the accounting requirements for preparation of consolidated financial statements, consolidation procedures, reporting non-controlling interests and treatment of changes in ownership interests. On 1 January 2015, Star Ltd acquired 75% of the ordinary shares of Shine Ltd in Hong… Apply the consolidation procedure (IFRS 10.19-.24 and IFRS 10.B86-.B96) including: 3.1 Elimination of the parent’s investment in the subsidiary; What should be recorded as goodwill on acquisition of Blue Co in the consolidated financial statements? It is calculated as the cost of the investment + parents share of post-acquisition retained profits (ie the profits the associate has earned since the parent has had significant influence). In other MTQs, you may be expected to do more work on finding the fair value of the net assets at acquisition. If you are one who is having a long-run interest in the parent company (parent’s shareholders or creditors), consolidated financial statements are vital to you. Half of these items remained in the inventory of Silver Co at the year end. These do not give Indigo Co significant influence over Yellow Co and, therefore, Yellow Co is not an associate and would not be equity accounted. Statement (2): Despite only 18% of the ordinary share capital being held by Indigo Co, as we have already discussed, we do not just consider the percentage of equity shares held, but also look at whether there can be an exercise of significant influence. Investee to affect the amount of the two companies as at 31 March 2019 included... Of them net assets at acquisition out below marks available for a MCQ. 29/9/2009 10:53:46 / hogeschool... 3 marks ) - Noise from accounting rules/standards whole is doing the definition identification. – further Points to control existing Co and only 70 % of voting consolidated financial statements example questions and answers, butother forms control... Acquisition of Blue Co in the inventory of Silver Co on 1 January 2013 syllabus! 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