E2 Groups: acquisitions, disposals and associates

Consideration is $700, NCI at fair value is $100 and the fair value of net assets is $850. What is the result?

• 1 A loss of $50
• 2 Goodwill of $150
• 3 A gain of $50 on a bargain purchase
• 4 Goodwill of $50

Where is a gain on a bargain purchase recognised?

• 1 In other comprehensive income
• 2 In share premium
• 3 In profit or loss
• 4 In goodwill

How are acquisition-related costs, such as legal fees, treated?

• 1 They are added to goodwill
• 2 They are deducted from equity
• 3 They are expensed
• 4 They are added to the consideration

A subsidiary depreciates assets over 10 years but the group policy is 8 years. What is done on consolidation?

• 1 The difference is goodwill
• 2 Nothing
• 3 The group policy is changed
• 4 The subsidiary's figures are adjusted to the group policy

A parent sells its entire holding in a subsidiary for $1,500. The net assets are $1,100, unimpaired goodwill is $200 and the NCI is $220. What is the group gain?

• 1 $400
• 2 $420
• 3 $640
• 4 $200

Which method is used for an associate?

• 1 Cost only
• 2 Proportionate consolidation
• 3 The acquisition method
• 4 The equity method

A subsidiary sells goods to the parent at a profit and some are still held. Who bears the unrealised profit adjustment?

• 1 Only goodwill
• 2 Only the parent
• 3 The subsidiary's profit, which affects the NCI share too
• 4 No one

A disposal of a subsidiary that is a separate major line of business is presented as:

• 1 A change in policy
• 2 An adjusting event
• 3 An investing activity only
• 4 A discontinued operation