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SBR Groups and foreign currency

ACCA · Strategic Professional · 8 questions

Name: ____________________   Date: ____________

  1. Under IFRS 10 an investor controls an investee when it has:

    • A Power, exposure to variable returns and the ability to use power to affect returns
    • B More than 50 percent of the shares in all cases
    • C Board representation only
    • D An investment above 20 percent

  2. 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:

    • A $250,000
    • B $150,000
    • C $240,000
    • D $100,000

  3. 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:

    • A $260,000
    • B $100,000
    • C $250,000
    • D $240,000

  4. 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:

    • A $30,000
    • B $200,000
    • C $60,000
    • D $140,000

  5. 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:

    • A $10,000
    • B $40,000
    • C $4,000
    • D $25,000

  6. A joint arrangement in which the parties have rights to the assets and obligations for the liabilities is a:

    • A Joint venture
    • B Subsidiary
    • C Joint operation
    • D Associate

  7. When a parent loses control of a subsidiary but keeps an interest, the retained interest is:

    • A Ignored
    • B Left at cost
    • C Remeasured to fair value at the date control is lost
    • D Treated as goodwill

  8. When a foreign operation is translated, income and expenses are translated at:

    • A The opening rate
    • B The closing rate
    • C The rate at the date of the transactions, or an average rate as an approximation
    • D The rate on the date of acquisition

Answer key

1. A, 2. A, 3. D, 4. C, 5. A, 6. C, 7. C, 8. C

  1. Control is defined by power, returns and the link between them. It can exist without a majority of votes.

  2. Goodwill = 800,000 + 150,000 - 700,000 = 250,000.

  3. NCI = 20% x 700,000 = 140,000. Goodwill = 800,000 + 140,000 - 700,000 = 240,000.

  4. 30 percent of 200,000 is 60,000, shown on one line in the group profit or loss.

  5. 25 percent of 40,000 is 10,000, eliminated from group profit and inventory.

  6. In a joint operation, each party accounts for its share of assets, liabilities, revenue and expenses.

  7. The gain or loss on disposal includes the remeasurement of the retained interest.

  8. Assets and liabilities are at the closing rate and the exchange difference goes to OCI.