***GROUPS***

Question 1

Groups

Answer 1

• Parent
• Subsisidiary (If Parent has 50% or more control)

Required to account for the subsidiary is consolidated financial statement.
* 100% of assets & liabilities
* 100% of financial performance (i.e. costs etc.)

Question 1

Joint ventures

Associates

Answer 1

JJoint ventures
Apply equity accounting (as shared ownership)
* (Bring is our 50% of post acq for profits for that co)

Associates
Apply equity accounting:
* (Bring is our 50% of post acq for profits for that co)

Question 2

Goodwill

Answer 2

Investment in subsidiary, joint venture or associate

(When you pay more than FV of assets acquiring)
(e.g. brand etc)

Question 3

Issues

Answer 3

• Incorrect classifications of (subsidiary vs associate)
• Different reporting dates for co’s
• Different reporitng framework (e.g. IFRS for 1 and local for another)
• Related party transactions (disclosures)
• Goodwill impairment (mgmt wont want to impair as is loss- mgmt covers up)
• Component auditors-

Question 4

Component auditor

Answer 4

• Experience
• Reputation and trust
• Qualified
• Staff assigned (experienced and competent)
• Independent or related party? (impact objectivity and reliability)
• Regulatory environment for component auditor base- might not be working to same standards.
• Can we actually see their work (practical for us)