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In what situation does an excess on acquisition arise and how does AASB 3 require it to be treated?


A) An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires an excess to be eliminated by recognising it as a gain in the period in which the entity was purchased.
B) An excess arises when the fair value of the purchase consideration is greater than the nominal value of the assets purchased. AASB 3 requires the fair values of the monetary assets acquired to be proportionately decreased until the excess is eliminated. If an excess balance remains it must be recognised as an expense in the income statement.
C) An excess arises when the cost of acquisition exceeds the fair value of the identifiable net assets purchased. AASB 3 requires the equity of the purchased entity to be proportionately decreased until the excess is eliminated.
D) An excess arises when the fair value of the identifiable net assets acquired by the entity exceeds the fair value of the consideration paid. AASB 3 requires a reassessment of the identification and measurement of the identifiable net assets, and a reassessment of the measurement of the fair value of the consideration paid. If an excess remains after the reassessment it must be recognised as income in profit or loss.
E) None of the given answers.

F) C) and E)
G) C) and D)

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D

Which of the following statements is an accurate description of the difference between a legal entity and an economic entity?


A) An economic entity is one that combines one or more legal entities with synergy such that they each make higher returns than they would individually. If an entity ceases to effectively produce increased returns in this way it becomes uneconomic. A legal entity is one that is recognised in law as having a separate existence from its owners.
B) A legal entity is one that uses appropriate corporate governance measures to ensure that it abides by legislative requirements and other legal regulations. An economic entity may span more than one legal entity, but is not a legal entity in itself.
C) An economic entity is one that is formed for the purpose of generating a profit and therefore a return to owners. A legal entity is one that is circumscribed by legal constitution or Accounting Standards as constituting a reporting entity.
D) A legal entity refers to an entity that has its own particular legal status such as a company, trust or partnership. The concept of an economic entity emphasises substance over legal form. It may operate as a co-ordinated entity and contain more than one legal entity.
E) None of the given answers.

F) A) and B)
G) C) and E)

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Minority interests are defined is AASB 127 as:


A) that portion of profit or loss and net assets of a subsidiary attributable to equity interests that are not owned directly by the parent.
B) that portion of net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.
C) that portion of profit or loss and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the parent.
D) that portion of profit or loss and net assets of a subsidiary attributable to equity interests that are not owned indirectly through subsidiaries, by the parent.
E) the largest single shareholding, less fifty per cent, not owned, directly or indirectly through subsidiaries, by the parent.

F) A) and D)
G) C) and E)

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Growl Ltd acquires all the issued capital of Tiger Ltd for a cash payment of $5,000,000 on 30 June 2005. The balance sheet of Tiger Ltd at purchase date is: Growl Ltd acquires all the issued capital of Tiger Ltd for a cash payment of $5,000,000 on 30 June 2005. The balance sheet of Tiger Ltd at purchase date is: The fair value of the net assets at the date of purchase was $4,200,000. What amount of goodwill or excess would be recorded in the consolidated statements at the date of purchase? A) $500,000 goodwill B) $300,000 discount C) $800,000 goodwill D) $389,000 discount E) None of the given answers. The fair value of the net assets at the date of purchase was $4,200,000. What amount of goodwill or excess would be recorded in the consolidated statements at the date of purchase?


A) $500,000 goodwill
B) $300,000 discount
C) $800,000 goodwill
D) $389,000 discount
E) None of the given answers.

F) B) and D)
G) A) and B)

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Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct? A) B) C) D) E) None of the given answers. The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct?


A) Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct? A) B) C) D) E) None of the given answers.
B) Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct? A) B) C) D) E) None of the given answers.
C) Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct? A) B) C) D) E) None of the given answers.
D) Sigmund Ltd acquires all the issued capital of Freud Ltd for a cash payment of $1,900,000 on 30 June 2004. The financial statements of both entities on 30 June 2005 are: The fair value of the net tangible assets of Freud Ltd on 30 June 2004 was $1,332,000. The equity of Freud at that time was made up of share capital of $1,172,000 and retained earnings of $160,000. Goodwill had been determined to have been impaired by $56,800 during the period. During the period ended 30 June 2005 there were no intragroup transactions. Which of the following consolidated financial statements is correct? A) B) C) D) E) None of the given answers.
E) None of the given answers.

F) C) and E)
G) C) and D)

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Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd? A) B) C) D) E) None of the given answers. The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd?


A) Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd? A) B) C) D) E) None of the given answers.
B) Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd? A) B) C) D) E) None of the given answers.
C) Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd? A) B) C) D) E) None of the given answers.
D) Candle Ltd acquires all the issued capital of Wick Ltd for a cash payment of $4,500,000 on 30 June 2004. The balance sheet of Wick Ltd at purchase date is: The fair value of the net assets of Wick Ltd as at 30 June 2004 is $3,800,000. What is the consolidation entry to eliminate the investment in Wick Ltd? A) B) C) D) E) None of the given answers.
E) None of the given answers.

F) A) and B)
G) A) and C)

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Which of the following statements is not in accordance with AASB 127 "Consolidated and Separate Financial Statements"?


A) A parent need not present consolidated financial statements if the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity.
B) Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity.
C) A parent consolidates subsidiaries that satisfy the criteria to be classified as assets held for sale.
D) Intragroup balances, transactions, income and expenses are eliminated in full for wholly-owned subsidiaries and in proportion to ownership for partially-owned subsidiaries.
E) None of the given answers.

F) A) and B)
G) A) and C)

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A subsidiary:


A) is excluded from consolidation because the investor is a venture capital organisation.
B) is not excluded from consolidation simply because the investor is a venture capital organisation.
C) is excluded from consolidation because its business activities are dissimilar from those of other entities within the group.
D) is not excluded from consolidation simply because the investor only has significant influence, and not control, over it.
E) is excluded from consolidation because the investor has no Board representation in the subsidiary.

F) B) and C)
G) A) and B)

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What are the major consolidation concepts?


A) Entity, partnership and parent.
B) Equity, control and ownership.
C) Parent-entity, ownership and proprietary.
D) Entity, parent-entity and proprietary.
E) None of the given answers.

F) A) and B)
G) B) and C)

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D

'Control' over a subsidiary, once determined as being in existence, can only be lost with a change in the level of ownership:

A) True
B) False

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On consolidation, the investment in subsidiary, shown in the investor's books, shall be eliminated in full against which of the following?


A) Assets and liabilities of the subsidiary.
B) Post-acquisition shareholders' funds of the subsidiary.
C) Share capital of the subsidiary acquired by the parent only.
D) Goodwill amount created on acquisition.
E) None of the given answers.

F) C) and D)
G) D) and E)

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In determining control, 'potential voting rights':


A) include those rights embedded in such instruments as share call options and share warrants.
B) which are currently exercisable should be taken into account.
C) even if they are not currently exercisable should be taken into account.
D) include those rights embedded in such instruments as share call options and share warrants and which are currently exercisable should be taken into account.
E) include those rights embedded in such instruments as share call options and share warrants, which are currently exercisable should be taken into account and C above and even if they are not currently exercisable should be taken into account.

F) C) and E)
G) All of the above

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Under AASB 127 parent companies may choose whether to present one set of consolidated accounts or to provide two or more sub-sets of the consolidated accounts to cover the whole group:

A) True
B) False

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Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2005. At that time the carrying value of the net assets of Kindawansa was $1,200,000. This amount was made up in equity as follows: share capital $1,000,000; retained earnings $200,000. Kindawansa has held some valuable land for a long time (purchased at $ 1,200,000) , but has not revalued it. Its fair value at 30 June 2005 was $2,800,000 (all other non-current assets are recorded at fair value) . Gingimup Ltd paid cash consideration of $3,000,000 for Kindawansa Ltd. Assuming that the land has not been revalued in the controlled entity's books, what are the elimination entries required to reflect the purchase of Kindawansa Ltd?


A) Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2005. At that time the carrying value of the net assets of Kindawansa was $1,200,000. This amount was made up in equity as follows: share capital $1,000,000; retained earnings $200,000. Kindawansa has held some valuable land for a long time (purchased at $ 1,200,000) , but has not revalued it. Its fair value at 30 June 2005 was $2,800,000 (all other non-current assets are recorded at fair value) . Gingimup Ltd paid cash consideration of $3,000,000 for Kindawansa Ltd. Assuming that the land has not been revalued in the controlled entity's books, what are the elimination entries required to reflect the purchase of Kindawansa Ltd? A) B) C) D) E) None of the given answers.
B) Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2005. At that time the carrying value of the net assets of Kindawansa was $1,200,000. This amount was made up in equity as follows: share capital $1,000,000; retained earnings $200,000. Kindawansa has held some valuable land for a long time (purchased at $ 1,200,000) , but has not revalued it. Its fair value at 30 June 2005 was $2,800,000 (all other non-current assets are recorded at fair value) . Gingimup Ltd paid cash consideration of $3,000,000 for Kindawansa Ltd. Assuming that the land has not been revalued in the controlled entity's books, what are the elimination entries required to reflect the purchase of Kindawansa Ltd? A) B) C) D) E) None of the given answers.
C) Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2005. At that time the carrying value of the net assets of Kindawansa was $1,200,000. This amount was made up in equity as follows: share capital $1,000,000; retained earnings $200,000. Kindawansa has held some valuable land for a long time (purchased at $ 1,200,000) , but has not revalued it. Its fair value at 30 June 2005 was $2,800,000 (all other non-current assets are recorded at fair value) . Gingimup Ltd paid cash consideration of $3,000,000 for Kindawansa Ltd. Assuming that the land has not been revalued in the controlled entity's books, what are the elimination entries required to reflect the purchase of Kindawansa Ltd? A) B) C) D) E) None of the given answers.
D) Gingimup Ltd purchased all the equity of Kindawansa Ltd on 30 June 2005. At that time the carrying value of the net assets of Kindawansa was $1,200,000. This amount was made up in equity as follows: share capital $1,000,000; retained earnings $200,000. Kindawansa has held some valuable land for a long time (purchased at $ 1,200,000) , but has not revalued it. Its fair value at 30 June 2005 was $2,800,000 (all other non-current assets are recorded at fair value) . Gingimup Ltd paid cash consideration of $3,000,000 for Kindawansa Ltd. Assuming that the land has not been revalued in the controlled entity's books, what are the elimination entries required to reflect the purchase of Kindawansa Ltd? A) B) C) D) E) None of the given answers.
E) None of the given answers.

F) B) and C)
G) A) and C)

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Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd? A) B) C) D) E) None of the given answers. Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd?


A) Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd? A) B) C) D) E) None of the given answers.
B) Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd? A) B) C) D) E) None of the given answers.
C) Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd? A) B) C) D) E) None of the given answers.
D) Fresco Ltd acquires all the issued capital of Indoor Ltd for a cash payment of $1,000,000 on 30 June 2005. The balance sheet of Indoor Ltd at purchase date is: Assuming the assets of Indoor Ltd are at fair value, what is the entry to eliminate the investment in Fresco Ltd? A) B) C) D) E) None of the given answers.
E) None of the given answers.

F) B) and D)
G) C) and E)

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AASB 127 identifies a number of factors that may indicate the existence of control. These include:


A) The ability to appoint the CEO of another entity.
B) The power to dominate the composition of the board of directors or governing body of another entity.
C) The power to require another entity to purchase goods and services from an entity that results in a benefit to the controlling entity.
D) The ability to appoint the CEO of another entity and the power to dominate the composition of the board of directors or governing body of another entity.
E) None of the given answers.

F) None of the above
G) All of the above

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Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase? A) B) C) D) E) None of the given answers. Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase?


A) Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase? A) B) C) D) E) None of the given answers.
B) Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase? A) B) C) D) E) None of the given answers.
C) Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase? A) B) C) D) E) None of the given answers.
D) Jasper Ltd acquires all the issued capital of Carrot Ltd for a cash payment of $2,800,000 on 30 June 2004. The balance sheet of both entities at purchase date is: Assuming the assets of Carrot Ltd are recorded at fair value, what is the consolidated balance sheet at the date of purchase? A) B) C) D) E) None of the given answers.
E) None of the given answers.

F) A) and E)
G) A) and D)

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'Control' exists when the parent owns less than half of the voting power of an entity when:


A) no other entity owns more than half either.
B) there is power to govern the financial and operating policies of the entity under a statute.
C) there is power to govern the financial and operating policies of the entity under an agreement.
D) there is power to govern the financial and operating policies of the entity under a statute and there is power to govern the financial and operating policies of the entity under an agreement.
E) no other entity owns more than half either, there is power to govern the financial and operating policies of the entity under a statute and there is power to govern the financial and operating policies of the entity under an agreement.

F) All of the above
G) A) and D)

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Goodwill arises at acquisition date when the purchase price exceeds the identifiable assets acquired and the liabilities assumed.

A) True
B) False

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True

Under AASB 127:


A) Management may agree with the auditors a flexible arrangement for the presentation of the group accounts where some companies or trusts within the group have a nature of business or location that makes their pattern of return and risk significantly different to the remaining entities in the group.
B) Companies that are non-homogeneous with the overall nature of the business of the group are prohibited from being consolidated and are required to have their financial statements presented separately.
C) Finance companies, which are highly geared by nature, are not required to be included in the consolidated accounts of groups that are not significantly involved in the finance business.
D) Companies within a group that are in distinctly different businesses do not have to be consolidated into a single set of consolidated accounts.
E) None of the given answers.

F) C) and D)
G) A) and E)

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