Full Consolidation

Question 1

What types of consolidation exist

Answer 1

IFRS 10 //// Full Consolidation (Control, >50%)

IAS 28 //// At Equity (Significant Control, >20% <50%)

IFRS 9 //// Investment (None, <20%)

Question 2

Defining Control

Answer 2

• Power over the investee
• Exposure, or rights, to variable returns from its involvement with the investee; and
• The ability to use its power over the investee to affect the amount of the investor’s return

Question 3

What if Parent doesnt own 100% (80% Parent, 20% Minority)

Answer 3

Parent get 80% of subsidary net income.

Deducts share that belongs to NCI

NCI B/S /// NCI is reflected under group equity
NCI CF /// Div paid to NCO are present in CF statement

Question 4

IAS 28 Investment in associate

Answer 4

IIA B/S //// Initially, investment is accounted at historical cost, over the course of time, gains & losses and contributions incurred by investee adjusts carrying value

IIA I/S /// NI share of investee that correspond to parent company is reported in I/S. Dividends not treated as income but reduction of investment carrying value (transfer of cash simply)
Line item “Invesmtent in associates after operating profit

IIA CF /// NI corresponding to investor is subtracted from NI before taxes to calc CFO. Dividends received are considered positive CF

Question 5

IAS 28 Exceptions

Answer 5

IAS 28 applied in accounting in associates EXCEPT for: VC organizations and mutual funds, unit trusts and similar entities

Question 6

IAS 39 – Accounting for assets and liabilities

Answer 6

Financial assets & liabilities can be classified at amortized cost and fair value

Classification is driven by characteristics of instrument and managerial intem

Question 7

IFRS 9

Answer 7

Financial asset initially recognized at fair value = acquisition cost
Three types:
Amortised cost:
Debt usually

FV through P&L:
Derivates, trading instruments

FV Through OCI:
Only when triggers:
Hedge Accouting

Question 8

IFRS 9 Where are changes in Fair value recognized?

Answer 8

If FVTPL → in Profit or Loss (I/S)

If AFS → in Other Comprehensive Income (OCI)

Question 9

Equity Investments – Fair Value Through P&L (FVTPL)

Answer 9

Measured at fair value, and:

Changes in fair value go to P&L (whether realized or unrealized).

Dividends received are also shown in P&L.

Question 10

Equity Investments – Fair Value Through OCI (FVOCI)

Answer 10

Also measured at fair value, but:

Changes in fair value go to OCI

Dividends go to P&L

No recycling of OCI to P&L, even upon disposal (under IFRS 9)

Question 11

Impairment Test

Answer 11

If recoverable amount < carrying amount: Impairment loss
If recoverable amount > carrying amount: no further action required

Question 12

Triggers for Impairment Test

Answer 12

1. Idle assets
2. Making decision to dispose in advance of retirement date
3. Planned replacement or volatility in resale markets or expected resale value
4. A CGU impairment where aircraft in CGU may be impaired as a result
5. Change in technology
6. Economic and market factors (Covid)

Question 13

Recognition of PPE

Answer 13

PPE initial costs:
 Purchase price at fair value
 Directly attributable cost (IAS 23 Borrowing Costs)
 Initial cost of dismantling the asset or restoring site

Question 14

IAS 23 Borrowing costs

Answer 14

 Borrowing costs are interest and other costs associated with borrowing funds
 Borrowing costs that are directly related to acquisition, construction or production of qualifying asset must be capitalized as part of cost of asset

Question 15

Capitalized maintenance costs?

Answer 15

Maintenance: recorded as expenses during period when incurred

EXCPETION: Programs that extend useful life of asset or increase value (are then capitalized

Question 16

DIfferences fvtpl, fvoci, amortized