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SBR Groups and foreign currency
8 ACCA Strategic Professional questions with answers and explanations.
Printable worksheet with answer key
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Under IFRS 10 an investor controls an investee when it has:
- 1 Power, exposure to variable returns and the ability to use power to affect returns
- 2 More than 50 percent of the shares in all cases
- 3 Board representation only
- 4 An investment above 20 percent
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Correct answer: Power, exposure to variable returns and the ability to use power to affect returns
Control is defined by power, returns and the link between them. It can exist without a majority of votes.
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A parent pays $800,000 for 80 percent of a subsidiary. NCI is measured at fair value of $150,000. The fair value of net assets is $700,000. Goodwill is:
- 1 $250,000
- 2 $150,000
- 3 $240,000
- 4 $100,000
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Correct answer: $250,000
Goodwill = 800,000 + 150,000 - 700,000 = 250,000.
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A parent pays $800,000 for 80 percent of a subsidiary. The fair value of net assets is $700,000. NCI is measured at its proportionate share of net assets. Goodwill is:
- 1 $260,000
- 2 $100,000
- 3 $250,000
- 4 $240,000
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Correct answer: $240,000
NCI = 20% x 700,000 = 140,000. Goodwill = 800,000 + 140,000 - 700,000 = 240,000.
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A parent holds 30 percent of an associate that earned a profit of $200,000. Under the equity method the group share of profit is:
- 1 $30,000
- 2 $200,000
- 3 $60,000
- 4 $140,000
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Correct answer: $60,000
30 percent of 200,000 is 60,000, shown on one line in the group profit or loss.
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A subsidiary sold goods to the parent for $100,000 at a margin of 25 percent on selling price. Goods with a transfer price of $40,000 are in the parent's inventory at the year end. The unrealised profit to eliminate is:
- 1 $10,000
- 2 $40,000
- 3 $4,000
- 4 $25,000
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Correct answer: $10,000
25 percent of 40,000 is 10,000, eliminated from group profit and inventory.
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A joint arrangement in which the parties have rights to the assets and obligations for the liabilities is a:
- 1 Joint venture
- 2 Subsidiary
- 3 Joint operation
- 4 Associate
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Correct answer: Joint operation
In a joint operation, each party accounts for its share of assets, liabilities, revenue and expenses.
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When a parent loses control of a subsidiary but keeps an interest, the retained interest is:
- 1 Ignored
- 2 Left at cost
- 3 Remeasured to fair value at the date control is lost
- 4 Treated as goodwill
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Correct answer: Remeasured to fair value at the date control is lost
The gain or loss on disposal includes the remeasurement of the retained interest.
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When a foreign operation is translated, income and expenses are translated at:
- 1 The opening rate
- 2 The closing rate
- 3 The rate at the date of the transactions, or an average rate as an approximation
- 4 The rate on the date of acquisition
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Correct answer: The rate at the date of the transactions, or an average rate as an approximation
Assets and liabilities are at the closing rate and the exchange difference goes to OCI.