Strategic Business Reporting Flashcards

Under IFRS 3, how should contingent consideration in a business combination be initially measured?

Answer: At fair value at the acquisition date

IFRS 3 requires contingent consideration to be recognized at fair value at the acquisition date, regardless of the probability of payment.

Which of the following best describes the 'control' criterion under IFRS 10 for consolidation purposes?

Answer: Power over the investee, exposure to variable returns, and ability to use power to affect returns

IFRS 10 defines control as having power over the investee, exposure or rights to variable returns, and the ability to use power to affect those returns.

When a parent loses control of a subsidiary without selling all its shares, how should the retained interest be treated?

Answer: Remeasured to fair value on the date control is lost

Upon loss of control, any retained interest is remeasured to fair value at that date and any gain or loss on the entire disposal is recognized in profit or loss.

Under IAS 28, an associate is defined as an entity over which the investor has:

Answer: Significant influence

IAS 28 defines an associate as an entity over which the investor has significant influence, which is presumed at 20–50% ownership.

How are translation differences on foreign subsidiaries treated under IAS 21?

Answer: Deferred in a foreign currency translation reserve within other comprehensive income

IAS 21 requires exchange differences arising on translation of foreign subsidiaries to be accumulated in a separate component of equity (OCI) until disposal.

In a group cash flow statement, how is the acquisition of a subsidiary (net of cash acquired) presented?

Answer: As an investing activity

Under IAS 7, the acquisition of subsidiaries net of cash and cash equivalents acquired is classified as an investing activity in the consolidated cash flow statement.