UEH LẬP BÁO CÁO TÀI CHÍNH THEO IFRS FILE ĐỀ TIẾNG ANH 2

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1.Which of the following companies would qualify to be regarded as subsidiaries of Alpha? (a) Beta in
which Alpha has 15% votes and a place on the board of directors; (b)Delta in which Alpha has 52%
votes but no place on the board of directors; (c) Gamma in which Alpha has 25% shares and two places
on the board of directors; (d) Theta in which Alpha holds 100% votes and all places on the board of
directors
A. a & b
B. b & d
C. a & c
D. b & c
ANSWER: B
2.Company A owns 80% Company B which owns 70% Company C. How many percent does non-
controlling interest account for in Company C?
A. 20%
B. 30%
C. 44%
D. 50%
ANSWER: C
3. Investor has significant influence to participate in the financial and operating policy decisions of the
investee. The investee is a/an ______ of the investor?
A. Subsidiary
B. Joint venture
C. Associate
D. Long term investments
ANSWER: C
4. In which of these cases is B not a subsidiary of A?
A. A owns 45% of the voting rights of B and has an agreement with a 15% shareholder C to vote for his
right
B. A owns 45% of the voting rights of B, while all other shares are distributed over numerous
shareholders, with no other shareholder having more than 1% of the share

C. A owns 55% of the shares of B and another shareholder C has 45% of the shares of B, where A has
written a substantive call option to C for 10% of the shares of B
D. A owns 35% of the shares of B and owns 100% of the shares of C, where C has 25% of the shares in
B
ANSWER: C
5. Which of the following does not result in a business combination for Pryor Ltd.?
A. Pryor acquired all the assets of Burchak Ltd
B. Pryor acquired an operating division of Nyle Ltd
C. Pryor made a basket purchase of 40% of Neilly Ltd.'s assets
D. Pryor acquired 65% of Kelly Co.'s voting shares
ANSWER: C
6. Which of the following would qualify a company to be regarded as a parent of another?
A. A parent should control the majority of the votes at subsidiary’s shareholders’ meetings
B. A parent should own majority shares in the subsidiary
C. A parent it and its subsidiary must both be in the same line of business
D. A parent and the subsidiary should both have the same persons as their director
ANSWER: A

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7. IFRS 10- Consolidated financial statement sets out how to determine whether one entity has control
over another entity. Which of the following statements is in accordance with either IFRS 10 definition
control or with the guidance prescribed to help identify whether control exists over another entity?
A. The investor must be the only party that receives variable returns from the other entity.
B. The investor must be have greater than 50% of the voting rights in the other entity.
C. The investor must be represented on the board of directors or governing body of the other entity.
D. The investor must have existing rights that give the current ability to direct relevant activities of the

other entity.
ANSWER: D
8. Which of the following statements is consistent with the principle of control as defined by IFRS 10
Consolidated Financial Statements?
A. The investor must be exposed to a return from the investee
B. The investor has the ability to use its power over the investee to affect the amount of the returns from
the investee.
C. An investor’s power over investee relates to its ability to determine the amount of variable returns
received from investee.
D. If two or more investors have existing rights to direct different relevant activities, no investors can
have control over the investee.
ANSWER: C
9. Control is the power:
A. To govern the financial and operating policies of an undertaking.
B. To control more than 40% of the ordinary shares.
C. Appoint board members in proportion to your shareholding.
D. To control more than 50% of net assets.
ANSWER: A
10. Which of the following companies would qualify to be regarded as subsidiaries of Alpha? (i)Beta in
which Alpha has 15% votes and a place on the board of directors; (ii) Delta in which Alpha has 52%
votes but no place on the board of directors; (iii) Gamma in which Alpha has 25% shares and two places
on the board of directors; (iv) Theta in which Alpha holds 100% votes and all places on the board of
directors
A. (ii) & (i)
B. ii&iii
C. ii&iv
D. i&iii
ANSWER: C
11. Which of the following would qualify a company to be regarded as a parent of another?
A. A parent and the subsidiary should both have the same persons as their directors

B. A parent should own majority shares in the subsidiary
C. A parent it and its subsidiary must both be in the same line of business
D. A parent should control the majority of the votes at subsidiary’s shareholders’ meetings
ANSWER: D
12. The power of an investor over an investee is significant influent, exhibiting that
A. The investor can appoint a majority of investee’ board of director
B. The investor can participate in the policy making process of the investee
C. The investor owns more than 20% of the investee’s equity capital
D. The investor owns more than 50% of the investee’s equity capital
ANSWER: B

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13. Which of the following items is the best consideration for an investor’s power over an investee?
A. Absolute voting right
B. Relative voting right
C. Absolute ownership ratio
D. Relative ownership ratio
ANSWER: B
14. IFRS 10 provides a definition of control and identifies three separate elements of control. Which one
of the following is not one of these elements of control?
A. Power over the investee
B. The power to participate in the financial and operating policies of the investee
C. Exposure to, or rights to, variable returns from its involvement with the investee
D. The ability to use its power over the investee to affect the amount of the investor's returns
ANSWER: B
15. Under which of the following circumstances does an entity lose significant power over the investee?
A. When it loses the power to participate in the financial and operating policy decisions of that investee

B. When it holds less than 10% of voting rights of the investee
C. When its investment ceases to be an associate or a joint venture
D. Any of the above
ANSWER: A
16. If an entity holds, directly or indirectly, __________ of the voting power of the investee, it is
presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not
the case.
A. 10 per cent or more
B. 20 per cent or more
C. 25 per cent or more
D. 50 per cent or more
ANSWER: B
17. A joint arrangement can be either a …
A. Joint venture or joint subsidiary
B. Joint operation or a joint venture
C. Joint operation or joint entity
D. Joint entity or joint subsidiary
ANSWER: B
18. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require the _____________ of the parties sharing control.
A. Highest level of professionalism
B. Unanimous consent
C. Collective judgement
D. Unbiased decisions
ANSWER: B
19. AB owns 60% of the equity shares of CD and 30% of the equity shares of EF. CD also owns 30% of
the equity shares of EF. All of the shareholdings were acquired on the same date. Which one in respect
of the consolidated financial statements of the AB group is true?
A. EF is an associate of the group as both AB and CD can exercise significant influence via their 30%
holdings

B. EF is an associate of the AB group because the effective interest of AB in EF’s results is 48%

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C. 48% of EF’s post-acquisition reserves should be recognized in the consolidated reserves of the AB
group
D. An indirect holding adjustment would be applied in the calculation of goodwill based on 52% of
CD’s investment in EF
ANSWER: C
20. IAS 28 shall be applied by all entities that are investors with __________ an investee.
A. Joint control of
B. Significant influence over
C. Control over
D. A or B
ANSWER: D
21. According to IFRS 10, the basis for consolidation is …
A. Regulatory requirements
B. Size of share capital of the investee
C. Control
D. Number of employees
ANSWER: C
22. According to IFRS 10, which types of entities are defined as exceptions when consolidating
particular subsidiaries?
A. Real Estate
B. Investment
C. Contruction
D. Insurance
ANSWER: B

23.In relation to goodwill arising from a business combination, which of the following statements in
accordance with IFRS 3 Business Combination
A. Goodwill should be measured as cost less accumulated amortization
B. Goodwill should be amortised on a straight – line basis over its useful life
C. Goodwill should be measured at cost less accumulated impairment losses
D. Goodwill is only tested for impairment if circumstances indicate it may be impaired
ANSWER: C
24.Which of the following statements is not a key feature of the acquisition method?
A. An acquirer being identified for each business combination
B. The acquired identifiable net assets being measured at the fair value
C. The cost of business combination being measured at fair value of the net assets received from the
acquiree
D. The goodwill being measured as the consideration transferred plus the amount of any NCI interest
plus the fair value of any previously held equity intersest in the acquire less the fair value of the
identifiable net assets acquired.
ANSWER: C
25. IFRS 3:
A. Allows either the unitings of interest method, or the acquisition method.
B. Allows only the unitings of interest method.
C. Allows only the acquisition method
D. Allows only the acquisition method or merger method
ANSWER: C

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26.A combination may involve: (i) The purchase of the equity of another undertaking; (ii) The purchase
of all the net assets of another undertaking; (iii) The assumption of the liabilities of another undertaking.
(iv)The purchase of some of the net assets of another undertaking, that together form one or more

businesses. (v)The purchase of assets from a firm in liquidation.
A. i – v
B. i – iii
C. ii – iii
D. i – iv
ANSWER: D
27.Applying the acquisition method involves the following steps: (i)Identifying an acquirer;
(ii)Measuring the cost of the combination. (iii)Allocating, at the acquisition date, the cost of the
combination to the assets acquired and liabilities and contingent liabilities assumed. (iv)Amortising the
goodwill.
B. i – ii
C. i – iii
D. ii – iii
E. i – iv
ANSWER: B
28.According to a survey of CFOs, what is the main reason for mergers?
A. Empire building
B. Operating synergies
C. Market power
D. Risk reduction
ANSWER: B
29.The objective of IFRS 11 is to ________________ by entities that have an interest in joint
arrangements.
A. Regulate accounting policy to be applied
B. Establish principles for financial reporting
C. Achieve uniformity in the accounting policies used
D. Unify the accounting techniques used
ANSWER: B
8.What entities shall apply IFRS 11?
A. Only those entities that have joint control over a joint arrangement

B. Only those entities that have significant influence over a joint arrangement
C. Only those entities that are a party to a joint arrangement
D. All of the above
ANSWER: C
30.Which of the following statement(s) is / are correct with regard to preparation of consolidated
financial Statement? (a)To be a subsidiary a parent should hold 100% of its equity shares;
(b)Consolidation merely addition together of two Statements of financial position; (c)In consolidation a
subsidiary and an associate are treated identically; (d)Consolidated balance sheet excludes assets not
owned by the group
A. b & c
B. none
C. a & b
D. a & b
ANSWER: B

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31.Which of the following statement(s) apply when consolidating statements of financial position: (a)
All inter-company balances should be cancelled; (b) The group share of the whole of subsidiary’s profit
is included within group profit; (c) Inter company profit should be eliminated unless it is realised by sale
to an outsider; (d) Subsidiary’s asset values need to be updated at the end of each accounting period
A. a & c
B. a & b
C. a & d
D. b & c
ANSWER: A
32.With regard to preparing consolidated statements of financial position which of the following
statements is / are correct? (a) the consolidated statement of financial position reports only parent’s

goodwill; (b) Any unrealized profit made by a subsidiary should be eliminated from its profit; (c) An
amount owed to each other within the group needs to be cancelled; (d) Only the group portion of any
unrealised profit need be eliminated
A. a & b
B. a
C. c
D. b & c
ANSWER: D
33.Which of the following statements are incorrect with regard to preparation of a consolidated statement
of financial position? (a) Gain on fair valuation of a subsidiary’s asset is a pre-acquisition profit; (b) Non
controlling interest does not deserve any portion of fair valuation gain; (c) If an asset is not reported in
the subsidiary’s ledger it need not be fair valued; (d) Gain on fair valuation of subsidiary’s asset inflates
the cost of goodwill
A. a , c & d
B. a, b & c
C. c & d
D. b, c & d
ANSWER: D
34.When preparing a consolidated statement of financial position any profit made by one member of the
group against another should be eliminated unless it has been realised by disposal to some one outside
the group. Which of the following is / are the reason(s) for this? (a) Because an entity cannot make a
profit against its own self; (b) Because it is fashionable to do so; (c) Because subsidiary’s assets needs
to be reported at the amount each cost the group; (d) Because the unsold goods may have to be returned
to the party purchased from
A. c & d
B. a & c
C. a, b & c
D. b, c & d
ANSWER: B
35.Though a subsidiary is only partly owned, the whole of the subsidiary’s sales, cost of sale and

expenses are aggregated with those of the parent to report the group’s income and expenses. Which one
or more of the following is/ are the justification for this? (a) That is how it is expected to be done, (b)
That is a legal requirement, (c) Otherwise the group would appear to be doing poorly with adverse effect
on share price, (d) To report the income generated by and expenses incurred by the group as a whole.
A. a & c
B. d

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C. b
D. b & d
ANSWER: B
36.In accordance with IFRS 10 – Consolidated financial statements, a consolidated statement of financial
position (or note thereto) would not present information relating to which of the following?
A. Investments in subsidiaries
B. Goodwill acquired by the group
C. Loans to entities not related to the group
D. NCI’share of consolidated net assets
ANSWER: A
37.Which of the following statement(s) is / are correct with regard to preparation of consolidated
financial Statement? (i) To be a subsidiary a parent should hold 100% of its equity shares;
(ii)Consolidation merely addition together of two Statements of financial position; (iii) In consolidation
a subsidiary and an associate are treated identically; (iv) Consolidated balance sheet excludes assets not
owned by the group
A. None
B. i&ii
C. ii&iii
D. ii&iv

ANSWER: A
38.Which of the following statement(s) apply when consolidating statements of financial position:(i)All
inter-company balances should be cancelled; (ii) The group share of the whole of subsidiary’s profit is
included within group profit; (iii) Inter company profit should be eliminated unless it is realised by sale
to an outsider; (iv) Subsidiary’s asset values need to be updated at the end of each accounting period
A. i & iii
B. i & ii
C. ii & iv
D. ii & iii
ANSWER: A
39.With regard to preparing consolidated statements of financial position which of the following
statements is / are correct?(i) the consolidated statement of financial position reports only parent’s
goodwill;(ii) Any unrealized profit made by a subsidiary should be eliminated from its profit;(iii) An
amount owed to each other within the group needs to be cancelled;(iv) Only the group portion of any
unrealised profit need be eliminated.
A. i & iii
B. i & ii
C. ii & iii
D. iii & iv
ANSWER: C
40.Which of the following statements are incorrect with regard to preparation of a consolidated statement
of financial position? (i) Gain on fair valuation of a subsidiary’s asset is a pre-acquisition profit, (ii) Non
controlling interest does not deserve any portion of fair valuation gain; (iii) If an asset is not reported in
the subsidiary’s ledger it need not be fair valued, (iv) Gain on fair valuation of subsidiary’s asset inflates
the cost of goodwill
A. ii & iii
B. ii, iii & iv
C. i & ii & iii

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D. i & iv

ANSWER: B

41. With regard to preparing consolidated income statement which of the following statements are

correct?(i) Only the group portion of subsidiary’s sales, cost of sales and expenses are included. (ii)Non

controlling interest is identified immediately after consolidating operating profit. (iii)Consolidated

movement of equity includes only the parent company’s dividend. (iv)Only the group portion of the

subsidiary’s post acquisition profit in brought forward in the consolidated movement of equity.

A. iii & iv

B. i & ii

C. ii & iii

D. i & iv

ANSWER: A

42.Though a subsidiary is only partly owned, the whole of the subsidiary’s sales, cost of sale and

expenses are aggregated with those of the parent to report the group’s income and expenses. Which one

or more of the following is/ are the justification for this?

A. That is how it is expected to be done

B. That is a legal requirement

C. Otherwise the group would appear to be doing poorly with adverse effect on share price

D. To report the income generated by and expenses incurred by the group as a whole.

ANSWER: D

43.For identifying the group profit for the current year at which of the following points is the profit

relating to non controlling interest removed.

A. After identifying the profit for the year after tax

B. After identifying the net profit before tax

C. After identifying the gross profit

D. After identifying the operating profit

ANSWER: A

44.In acquiring Au Ltd., Ag Ltd. included a provision for contingent consideration. The value of this

consideration will be determined by an event that will occur after the acquisition date. How should the

recognition of the amount of the contingency be accounted for?

A. As a gain/loss on comprehensive income statement

B. As an adjustment to the share capital

C. As an adjustment to retained earnings

D. As an adjustment to goodwill

ANSWER: D

45.Under IFRS 3, acquired contingent liabilities are:

A. Always included in the cost of combination.

B. Included in the cost of combination, only if they can be reliably measured.

C. Included in goodwill.

D. Included in NCI

ANSWER: B

46.The cost of a combination includes: (i)Liabilities incurred or assumed by the acquirer.;

(ii)Professional fees paid to accountants. (iii)Legal advisers’ fees. (iv)Valuers’ fees. (v)General

administrative costs:

A. I

B. ii – iii

C. i – iv

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D. i – v
ANSWER: A
47.For an adjustment to the cost of the combination contingent on future events, the acquirer must
include the amount of that adjustment in the cost of the combination at the acquisition date, if the
adjustment is:
A. Probable and can be measured reliably.
B. Certain and exactly measurable.
C. Payable within one year.
D. Receivable within one year
ANSWER: A
48.When preparing a consolidated statement of financial position the identifiable non monetary assets
of the subsidiary need to be fair valued for which of the following reason / reasons?(i) To inform the
acquired company what its assets are worth in the market; (ii) To comply with the practice followed over
the years; (iii) To report each of the subsidiary’s assets at what it cost the group to acquire; (iv) To
identify the amount paid for goodwill as the residual not attributed to other assets
A. ii & iii;
B. ii & iv;
C. iii & iv
D. i & iii

ANSWER: C
49.When preparing a consolidated Statement of financial position the identifiable non monetary assets
of the subsidiary need to be fair valued. Which of the following assets of the subsidiary need to be fair
valued? (i) Land and building appearing in the books of the subsidiary; (ii) Trade receivables reported
on the subsidiary’s balance sheet; (iii) Brand name the cost relating to which the subsidiary has already
fully written off; (iv) Inventory reported on the subsidiary’s statement of financial position
A. i, iii & iv
B. ii & iii & iv
C. i, ii & iii
D. ii & iii
ANSWER: A
50.Which accounting method is applied for investment in subsidiaries on separate finacial statements?
A. Cost method
B. Equity method
C. Consolidation method
D. Acquisition method
ANSWER: A
51.An investor issues it’s shares to acquire an investee’s share. The cost of this investment is priorly
measured via
A. The norminal value of investor’s shares issued
B. The norminal value of investee’s shares acquired
C. The fair value of investor’s shares issued
D. The fair value of investee’s shares acquired
ANSWER: C
52.When a parent entity has previously held an investment in a subsidiary prior to gaining control the
effect on the consolidation process is as follows:
A. There is no impact
B. The change in the fair value of the previously held interest is recognised in profit or loss

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C. The change in the fair value of the previously held interest is recognised in retained earnings
D. The change in the fair value of the previously held interest is recognised in other comprehensive
income
ANSWER: B
53.Which of the following is not an example of an intra-group balance?
A. A loan made by one subsidiary to another
B. A trade receivable owing to a subsidiary by an individual who is one of its customers
C. A loan made by a parent company to a subsidiary
D. A trade payable owing to a subsidiary by its parent company
ANSWER: B
54.When preparing a Consolidated Income Statement, inter-company transactions are cancelled. Which
one or more of the following would you say is the reason for this step? (a) That is how it is expected to
be done. (b) Otherwise group earnings can be inflated by one within the group earning from another, (c)
Otherwise the same amount is double counted both as an income and expense, (d) Failure to do so would
be bad for the group image
A. a & c
B. b & c
C. b & d
D. c & d
ANSWER: B
55.When preparing a consolidated statement of financial position any profit made by one member of the
group against another should be eliminated unless it has been realised by disposal to some one outside
the group. Which of the following is / are the reason(s) for this? (i) Because an entity cannot make a
profit against its own self; (ii) Because it is fashionable to do so; (iii) Because subsidiary’s assets needs
to be reported at the amount each cost the group; (iv) Because the unsold goods may have to be returned
to the party purchased from
A. i & ii

B. ii & iii
C. iii& iv
D. i & iii
ANSWER: D
56.Which of the following is not an example of an intra-group balance?
A. A loan made by one subsidiary to another
B. A trade receivable owing to a subsidiary by an individual who is one of its customers
C. A loan made by a parent company to a subsidiary
D. A trade payable owing to a subsidiary by its parent company
ANSWER: A
57.A consolidation worksheet adjustment to eliminate the effect of interest revenue and interest expense
relating to intragroup advances has the following tax effect:
A. No tax effect
B. Increase in DTA
C. Increase in DTL
D. Decrease in DTE
ANSWER: A
58.Select the correct statement with regards to intragroup balances and transactions during consolidation:
A. Intragroup balances and transactions must be eliminated
B. Intragroup balances and transactions must be eliminated to the extent of non-controlling interest

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C. Intragroup balances and transactions must be eliminated in proportion to the percentage of effective
ownership
D. Intragroup balances and transactions do not have to be eliminated
ANSWER: A
59.Which of the following is not an example of an intra-group balance?

A. A loan made by a parent company to a subsidiary
B. A loan made by one subsidiary to another
C. A trade receivable owing to a subsidiary by an individual who is one of its customers
D. A trade payable owing to a subsidiary by its parent company
ANSWER: C

60.In an accounting period, a parent company has pre-tax profits of £5 m and profits after tax of £3.5 m.
Its 75% subsidiary has pre-tax profits of £2 m and profits after tax of £1.4 m. The profit attributable to
the non-controlling interest is:
A. £500,000
B. £1,750,000
C. £350,000
D. £1,225,000

ANSWER: C
61.Which of the following is an example of an intra-group item which is cancelled out when preparing
the group statement of comprehensive income?

A. Interest payable by a subsidiary to its parent
B. Management expenses charged by one subsidiary to another
C. Administrative fees charged by a parent to a subsidiary
D. All of the above

ANSWER: D
62.If a subsidiary sold inventory to a parent. An effect of the consolidation adjustment to eliminate the
unrealised profit in inventory would be:
A. Reduce the NCI in the group profit for the year.
B. The NCI would not be affected since the unrealised profit is in the inventory held by the parent entity.
C. The NCI would not be affected since a consolidation adjustment cannot affect the profit for the year

of the subsidiary and thus cannot affect the NCI in that subsidiary.
D. None of the above
ANSWER: A

63.The shareholders’ interest in a subsidiary that is termed a “NCI” derives its name because, in
comparison to the interest held by the shareholders of the parent entity, that interest:

A. Has less equity in the subsidiary
B. Controls less voting power in the subsidiary
C. Has less equity and controls less voting power in the subsidiary
D. None of the above

ANSWER: B

64.In the preparation of consolidated financial statements, the measurement of a NCI in the shareholders’
equity of a subsidiary at balance date may be affected by:

A. Management fees charged to the subsidiary by the parent entity

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B. Unrealised profits arising from sales of inventories in the previous period by the subsidiary to
another subsidiary in the same group

C. Consolidation adjustments made against the retained profits of the subsidiary at the end of the
previous period.

D. None of the above

ANSWER: D
65.A parent owns two third of the subsidiary’s equity. As at a year end the subsidiary’s inventory
includes goods sent to it by the parent invoiced at £360,000. Parent has purchased these goods for
£300,000. Which of the following are the correct entries for eliminating unrealised profit?
A. Debit the subsidiary’s retained earnings and credit the subsidiary’s inventory with £45,000
B. Debit the parents retained earnings and credit subsidiary’s inventory with £45,000
C. Debit the subsidiary’s retained earnings and credit the subsidiary’s inventory with £60,000
D. Debit the parent’s retained earnings and credit the subsidiary’s inventory with £60,000
ANSWER: D
66.What is the amount of the unrealised profit to be eliminated if the parent’s year-end inventory includes
at £540,000 goods invoiced to it by its 60% owned subsidiary at cost plus 25%.
A. £64,800
B. £135,000
C. £81,000
D. £108.000
ANSWER: D
67.When preparing a set of group financial statements, the correct treatment of dividends paid by a
subsidiary company to its non-controlling shareholders is to:
A. Cancel them against dividends received by the parent company
B. Ignore them completely
C. Add them in the non-controlling interest column in the group statement of changes in equity
D. Deduct them in the non-controlling interest column in the group statement of changes in equity
ANSWER: D

68.The amount of profit attributable to the non-controlling interest in a 90% subsidiary is equal to:

A. 10% of the group profit before tax
B. 10% of the group profit after tax
C. 10% of the subsidiary's profit before tax
D. 10% of the subsidiary's profit after tax

ANSWER: D

69.When preparing a group statement of comprehensive income, the correct treatment of dividends paid
by a subsidiary company to its non-controlling shareholders is to:

A. Ignore them completely
B. Cancel them against dividends received by the parent company
C. Subtract them from the profit attributable to the non-controlling interest
D. Add them to the profit attributable to the non-controlling interest

ANSWER: A
70.Under Parent’s theory, NCI is presented in
A. Liability
B. Equity
C. Share capital

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D. Profit
ANSWER: A
71.According to IFRS 10, NCI is classified as:
A. Part of the equity of the parent entity
B. Part of the equity of the group
C. A liability of the parent entity
D. A liability of the group
ANSWER: B
72.With regard to preparing consolidated income statement which of the following statements are

correct? (a) Only the group portion of subsidiary’s sales, cost of sales and expenses are included. (b)
Non controlling interest is identified immediately after consolidating operating profit, (c) Consolidated
movement of equity includes only the parent company’s dividend, (d) Only the group portion of the
subsidiary’s post acquisition profit in brought forward in the consolidated movement of equity.
A. a, b & c
B. b & d
C. a, c & d
D. c & d
ANSWER: D
73.For identifying the group profit for the current year at which of the following points is the profit
relating to non controlling interest removed.
A. After identifying the operating profit
B. After identifying the gross profit
C. After identifying the net profit before tax
D. After identifying the profit for the year after tax
ANSWER: D
74.Subsidiary’s inventory at the year end included £180,000 purchased from its parent. Further goods
invoiced by the parent at £45,000 were in transit. The parent invoices the subsidiary at cost plus 20%.
The amount of unrealised profit that needs to be eliminated from the parent’s retained earnings would
be:
A. £38,333
B. £30,000
C. £37,500
D. £36,000
ANSWER: C
75.During an accounting period, a parent company sells goods to one of its subsidiaries for £200,000.
This represents cost plus 25%. At the end of the accounting period, one fifth of these goods are still held
in the subsidiary's inventories. The cost of sales figures reported in the parent's and the subsidiary's
financial statements are £890,000 and £530,000 respectively. The parent company has a 60% interest in
the subsidiary's ordinary shares. The cost of sales figure that should appear in the consolidated statement

of comprehensive income for the year is:
A. £1,228,000
B. £1,260,000
C. £1,212,000
D. £1,096,000
ANSWER: A
76.What is the amount of the unrealised profit to be eliminated if the parent’s year-end inventory
includes at £540,000 goods invoiced to it by its 60% owned subsidiary at cost plus 25%.

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A. £135,000
B. £108,000
C. £81,000
D. 64,800
ANSWER: B
77.As at the year end the parent’s statement of financial position reports rent receivable as an asset at
£600 and this includes £150 due from the subsidiary. Subsidiary reports rent payable as £150. Which of
the following will be included in the consolidated statement of financial position?
A. Rent receivable as an asset at £600 and rent payable as a current liability at £150.
B. Rent receivable as an asset at £450 and rent payable as a current liability at £150
C. Rent receivable as an asset at £450 and report nothing within Current liabilities as rent payable
D. Rent receivable as an asset at £600 and report nothing as current liability
ANSWER: C
78.On 1 July 20x7, Spider acquired 60% of the equity share capital of Fly and on that date made a $10
million loan to Fly at a rate of 8% per annum. What will be the effect on group retained earnings at the
year end date of 31 December 20x7 when this intragroup transaction is cancelled?
A. Group retained earnings will increase by $400,000

B. Group retained earnings will be reduced by $240,000
C. Group retained earnings will be reduced by $160,000
D. There will be no effect on group retained earnings
ANSWER: D
79.The amount of profit attributable to the non-controlling interest in a 90% subsidiary is generally equal
to:
A. 10% of the subsidiary's profit before tax
B. 10% of the group profit before tax
C. 10% of the group profit after tax
D. 10% of the subsidiary's profit after tax
ANSWER: D
80.Which of following items should have impact on the non-controlling interest on consolidated
financial statements?
A. Revaluation entries at acquisition date
B. Investment elimination entry
C. Unrealised intragroup profit of downstream transaction
D. Amortised amount of relaluation reserve
ANSWER: D
81.When preparing a set of group financial statements, the correct treatment of dividends paid by a
subsidiary company to its non-controlling shareholders is to:

A. Cancel them against dividends received by the parent company
B. Ignore them completely
C. Add them in the non-controlling interest column in the group statement of changes in equity
D. Deduct them in the non-controlling interest column in the group statement of changes in equity
ANSWER: D
82.For the purposes of equity accounting, significant influence is regarded as the power of an investor
to:

A. control the financial and operating policies of an associate

B. participate in the financial and operating policy decisions of an investee
C. participate in the day-to-day management of a joint venture interest

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D. dominate the financing decisions of an entity.

ANSWER: B
83.Which of the following information does NOT increase the income from associate?
A. The associate’s profit for the year
B. Realisation of unrealised interentity profit at the beginning of the year
C. Unrealised interenty profit for transactions incurred in the year
D. Realisation of revaluation deficit of the associate’s asset at acquisition date
ANSWER: C
84.An investment in an associate is normally accounted for using the equity method. What is this method
requiring that the investment in the associate?
A. Initially recognised at cost and not adjusted thereafter
B. Initially recognised at cost and then adjusted to fair value in subsequent accounting periods
C. Initially recognised at cost and then adjusted in each subsequent accounting period to reflect the
investor's share of the associate's profit or loss for the period
D. Recognised at fair value
ANSWER: C
85.How should transactions between a venturer and the joint venture be accounted for?
A. The same as for transactions with independent third parties
B. Only the portion of the gain or loss attributable to the interests of the other venturers should be
recognized
C. The portion of the gain or loss attributable to the interests of the other venturers should be eliminated
D. Gains on the transactions should be deferred, losses should be immediately recognized

ANSWER: B
86.Under the cost model of accounting for an investment, changes to the carrying amount of the
investment occur if
A. the investee earns post-acquisition profits or losses
B. goodwill included in the investment is amortised
C. the investment is impaired
D. dividends are received from the investee
ANSWER: C
87.The method of accounting that applies to an investor and associate relationship is the
A. cost method
B. fair value method
C. consolidation method
D. equity method
ANSWER: D
88.For the purposes of equity accounting an associate is a business entity including
A. an unincorporated entity
B. a joint venture
C. a subsidiary
D. venture capital organisations
ANSWER: A
89.The application of the equity accounting method of accounting is based on the investor owning:
A. more than 50% of the voting power in an associate
B. more than 20% of the voting power in an associate
C. less than 20% of the voting power in an associate
D. part of the share capital of an associate whether or not there are voting rights attached

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ANSWER: B
90.The equity method of accounting need not be applied where the investment:

A. represents more than 20% of the voting shares of an associate
B. does not provide the investor with significant influence
C. is held exclusively with a view to its disposal within 12 months
D. is made by an investor who has no subsidiaries.

ANSWER: C
91.Where all of the following conditions apply an investor need not apply the equity method of
accounting: (i) The investor is a wholly owned subsidiary or a partly owned subsidiary and
its owners do not object to the method not being used; (ii) The investor's debt or equity securities
are not traded in a public market; (iii) The investor has not filed financial statements with a regulatory
organisation for the purpose of issuing any class of securities in a public market; (iv) The ultimate
parent of the investor publishes consolidated financial statements that comply with IFRS
A. I and IV only
B. II and III only
C. I, II and III only
D. I, II, III and IV.
ANSWER: D
92.In respect to the equity method of accounting, where an investor has no subsidiaries the investor must
apply the:
A. cost method of accounting for investments in associates
B. consolidated financial reporting
C. equity method in its own accounting records
D. net present value method to measuring the expected cash flows from an associate
ANSWER: C
93.The 'one-line' equity accounting method is used when accounting for an investment in:
A. a subsidiary
B. a unit trust

C. a joint venture
D. an associate
ANSWER: D
94.Where goodwill is acquired on an investment in an associate the goodwill is:
A. amortised across the useful life of the goodwill
B. written off immediately against the carrying amount of the investment
C. carried as a separate asset in the accounting records of the investor;
D. not subject to amortisation
ANSWER: D
95. When an associate declares and pays a dividend out of pre-acquisition profits the application of the
equity method results in the investor making the following adjustment:
A. DR Investment in associate;
B. Cr Cash;
C. CR Dividend revenue
D. No adjustment.
ANSWER: D
96.If an associate incurs losses the investor is required to:
A. Ignore the losses for the purposes of equity accounting adjustments;
B. recognise losses only to the point where the carrying amount is equal to the initial investment;

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C. recognise losses to the point where the carrying amount of the investment is zero;
D. reclassify the investment as a current asset
ANSWER: C
97.Where an investor has discontinued the use of the equity method because the associate has incurred
losses it must disclose the:
A. unrecognised share of current period and cumulative losses of the associate

B. reason why it has discontinued the method
C. accounting policy it has adopted in place of the equity method
D. effect on the statement of changes in equity if it had continued to use the method.
ANSWER: A
98.Investments in associates accounted for using the equity method are presented in the statement of
financial position amongst:
A. equity
B. non-current liabilities;
C. current assets
D. non-current assets
ANSWER: D
99.Tea Limited acquired a 35% investment in Cup Limited for $20 000. Tea Limited also owns two
subsidiaries and prepares consolidated financial statements. Cup Limited declared and paid a dividend
of $5 000 during the current financial year. The appropriate consolidation adjustment to record this
transaction will include the following entry:
A. DR Investment in associate
B. DR Cash
C. DR Dividend revenue
D. DR Share of profit of associate.
ANSWER: C
100.Boyce Ltd. made an investment in a joint venture. After properly making an allocation for a fair
value adjustment, there was $25,000 remaining. How should this $25,000 be reported?
A. It should be shown as an adjustment in the shareholders' equity section of the statement of financial

position.
B. It should be included in the carrying value of the investment.
C. It should be shown as an adjustment on the statement of income.
D. It should be classified as goodwill on the statement of financial position
ANSWER: B

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