Australian-Financial-Accounting-7th-Edition_23to35

Chapter 31 Key

1. Under the single-date method, the aggregate costs of the investments would be eliminated against the parent’s share of capital and reserves at the date control of the subsidiary has been ultimately established and only one amount of goodwill (or bargain gain on purchase) is calculated.

TRUE

Chapter – Chapter 31 #1
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

2. AASB 10 Consolidated Financial Statements prescribes that changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

TRUE

Chapter – Chapter 31 #2
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

3. Where a parent entity with a controlling interest in a subsidiary obtains additional equity, the carrying amounts of the controlling and non-controlling interests should be adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the fair value paid and the carrying amount of the additional interest acquired is recognised directly in profit or loss of the parent entity.

FALSE

Chapter – Chapter 31 #3
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

4. In a business combination achieved in stages, the acquirer shall re-measure its previously held equity interest in the acquiree at its acquisition-date fair value and recognise the resulting gain or loss, if any, in equity.

FALSE

Chapter – Chapter 31 #4
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

5. Control over a subsidiary may be lost without a change in absolute or relative ownership levels. An example of this is loss of control to a court administrator as a result of bankruptcy.

TRUE

Chapter – Chapter 31 #5
Difficulty: Easy
Section: 31.02 Decrease in the ownership interest in a subsidiary

6. Once control over a subsidiary has been lost, the parent entity must derecognise the individual assets, liabilities and equity including any non-controlling interest relating to that subsidiary.

TRUE

Chapter – Chapter 31 #6
Difficulty: Easy
Section: 31.02 Decrease in the ownership interest in a subsidiary

7. When additional shares in a subsidiary are acquired, AASB 10 requires each acquisition to be accounted for separately.

FALSE

Chapter – Chapter 31 #7
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

8. The required method (according to AASB 10) of accounting for the acquisition of additional shares in a subsidiary is the single-date method.

TRUE

Chapter – Chapter 31 #8
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

9. The step-by-step method, where the need to revalue the subsidiary’s assets, liabilities and contingent liabilities to fair value at each acquisition date, is not an indication that the acquirer has elected to apply the revaluation method for measuring assets, such as that prescribed by AASB 116 is no longer permitted by accounting standards.

TRUE

Chapter – Chapter 31 #9
Difficulty: Easy
Section: 31.01 Increase in the ownership interest held in a subsidiary

10. When shares in a subsidiary are sold during a period, any income and expenses recorded in the consolidated accounts that relate to the subsidiary are eliminated.

FALSE

Chapter – Chapter 31 #10
Difficulty: Easy
Section: 31.02 Decrease in the ownership interest in a subsidiary