IDENTIFICATION

Question 1

deals with the accounting for a business combination at
the acquisition date.

Answer 1

PFRS 3

Question 2

deals with the preparation
and presentation of consolidated financial statements after the
business combination.

Answer 2

PFRS 10

Question 3

“the financial statements
of a group in which the assets, liabilities, equity, income,
expenses and cash flows of the parent and its subsidiaries are
Presented as those of a single economic entity.”

Answer 3

Consolidated financial statements

Question 4

“a parent and its subsidiaries.

Answer 4

Group

Question 5

“an entity that controls one or more entities.”

Answer 5

Parent

Question 6

“an entity that is controlled by another entity.”

Answer 6

Subsidiary

Question 7

is the basis for consolidation. PFRS 10 requires an investor
to determine whether it is a parent by assessing whether it
controls the investee.

Answer 7

Control

Question 8

“an investor controls an investee when the investor is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to affect those returns through its power over the investee.”

Answer 8

Control of an investee

Question 9

An investor has ___ over an investee when the investor has
existing rights that give it the current ability to direct the
investee’s relevant activities

Answer 9

Power

Question 10

“activities of the investee that significantly affect the investee’s returns.”

Answer 10

Relevant activities

Question 11

When voting rights do not have a significant effect on an
investee’s returns, such as when voting rights relate to administrative tasks only and contractual arrangements
determine the direction of the relevant activities, the investor
needs to assess those contractual arrangements in order to determine whether it has rights sufficient to-give it power over the investee.

Answer 11

Administrative rights

Question 12

If two or more investors individually (unilaterally).have the ability to direct different relevant activities, the investor that has the current ability to direct the activities that most significantly affect the returns of the investee has power over the investee.

Answer 12

Unilateral rights

Question 13

are “rights designed to protect the interest of the party holding those rights without giving that party Power over the entity to which those rights relate.

Answer 13

PROTECTIVE RIGHTS

Question 14

In assessing whether it has a power, an investor considers only ____ i.e. rights which the investor has the ability to exercise.

Answer 14

substantive rights

Question 15

The investor’s ability to direct the relevant activities of an investee is normally obtained through ____

Answer 15

voting rights

Question 16

When determining the existence of control, an investor considers potential voting rights that are currently exercisable, regardless f the intention or financial ability to exercise them.

Answer 16

Potential voting rights

Question 17

The financial statements of the parent and its subsidiaries used in preparing consolidated financial statements shall have the same reporting date.

Answer 17

Reporting dates

Question 18

shall be used, If the subsidiary uses different accounting policies, its financial statements need to be adjusted to conform to the parent’s accounting policies before the, are consolidated

Answer 18

Uniform accounting policies

Question 19

Consolidation begins from the date the investor obtains control of the investee and ceases when the investor loses control of the investee.

Answer 19

Consolidation period

Question 20

Income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognized in the consolidated financial statements at the acquisition date.

Answer 20

Measurement

Question 21

The _____ of the subsidiary are based on the amounts of the assets and liabilities recognized in the consolidated financial statements at the acquisition date.

Answer 21

Income and expenses

Question 22

are accounted for in the parent’s
separate financial statements either:
a. at cost;
b. in accordance with PFRS 9; or
c using the equity method

Answer 22

Investments in subsidiaries

Question 23

are transactions between a parent and a subsidiary. The effects of these transactions are eliminated when preparing consolidated financial statements because the parent
and the subsidiary are viewed as a single reporting entity. This is like the statement

“You cannot transact with your own self.” To exemplify, let me tell you a story.

Answer 23

Intercompany transactions

Question 24

• the parent sells to the subsidiary

Answer 24

Downstream

Question 25

- the subsidiary sells to the parent

Answer 25

Upstream

Question 26

are also identified as either downstream or upstream because only upstream sales affect non-controlling interests.

Answer 26

Intercompany sale of property, plant and equipment

Question 27

When the investment in subsidiary is measured at cost or in accordance with PFRS 9, dividends received from the subsidiary are recognized in profit or loss

Answer 27

Intercompany dividends

Question 28

When a parent or a subsidiary acquires bonds issued by the other, both the investment in bonds and the bonds payable are eliminated in the consolidated financial statements.

Answer 28

Intercompany bond transaction

Question 29

A parent can lose control of a subsidiary in much the same way it can obtain control. That is, with or without a change in absolute or relative ownership levels and with or without the investor being involved in that event.

Answer 29

Loss of control

Question 30

this theory focuses on the parent legal interest in the subsidiary.

Answer 30

Proprietary theory

Question 31

Advocates of this concept believe that since the parent acquires only a portion of the subsidiary, only that portion should be shown on the consolidated financial statements.

Answer 31

Proprietary theory

Question 32

this theory focuses on the parents ability to control the subsidiary as a whole and not only up to the extent of its legal interest in the subsidiary.

Answer 32

Parent company theory

Question 33

Advocates of this concept believe that the subsidiary is an extension of the parent ompany. Therefore, the consolidated financil statements should be prepared from the viewpoint of the owners of the parent.

Answer 33

Parent company theory

Question 34

similar to the parent company theory, the entity theory is also based on "control."

Answer 34

Entity theory (Contemporary theory)

Question 35

advocates of this concept believe that the parent and the subsidiary are members of a group (the consolidated entity). Therefore, consolidated financial statements should be prepared from the viewpoint of the group rather than of the owners of the parent

Answer 35

Entity theory (Contemporary theory)

Question 36

like the parent company and entity theories, the hybrid theory is also based on "control."

Answer 36

Hybrid theory (Traditional theory)

Question 37

As the name implies, the hybrid theory incorporates characteristics of both the parent company theory and the entity-theory.

Answer 37

Hybrid theory (Traditional theory)

Question 38

The basis for consolidation is power. (True/False)

Answer 38

False -- NOT POWER

Question 39

Entity A acquired Entity B on November 1, 20x1. The 20x1 consolidated profit includes Entity B's profit from January 1 to December 31, 20x1 - it is as if control had existed for the entire year. (True/ False)

Answer 39

False -- because consolidation start when control is obtain

Question 40

Entity A acquired 90% interest in Entity B on January 1, 20x1 when Entity B's net assets had a fair value of P100. On December 31, 20x2, Entity B's net assets increased to P200 after adjustments for acquisition-date fair values, net of depreciation. The NCI on December 31, 20x2 is P20. (True/False)

Answer 40

True

Question 41

Entity A acquired 90% interest in Entity B on January 1, 20x1 when Entity B's net assets had a fair value of P100. On December 31, 20x2, Entity B's net assets increased to P200 after adjustments for acquisition-date fair values, net of depreciation. Before consolidation, Entity A's retained earnings balance is P1,000. The consolidated retained earnings is P1,090. (True/False)

Answer 41

True

Question 42

Entity A acquired 90% interest in Entity B on January 1, 20x1 when Entity B's net assets had a fair value of P100. On December 31, 20x2, Entity B's net assets increased to P200 after adjustments for acquisition-date fair values, net of depreciation. NCI in the net assets of a subsidiary is presented in the consolidated financial statements as a mezzanine item. (True/False)

Answer 42

False -- EQUITY SECTION SEPARATE FROM THE PARENTS EQUITY

Question 43

Entity A acquired 90% interest in Entity B on January 1, 20x1 when Entity B's net assets had a fair value of P100. On December 31, 20x2, Entity B's net assets increased to P200 after adjustments for acquisition-date fair values, net of depreciation. Goodwill is attributed both to the owners of the parent and non-controlling interests only if the non-controlling interests are measured at fair value. (True/False)

Answer 43

True

Question 44

Entity A acquired 90% interest in Entity B on January 1, 20x1 when Entity B's net assets had a fair value of P100. On December 31, 20x2, Entity B's net assets increased to P200 after adjustments for acquisition-date fair values, net of depreciation. The amount of goodwill attributed to non-controlling interests is included in the measurement of non-controlling interests in the subsidiary's net assets. (True/False)

Answer 44

True

Question 45

Day Co. owns 80% of Night Co. Day and Night reported profits of P200 and P100, respectively, in 20x1. There is no depreciation of fair value adjustment. The consolidated profit is P300. (True/False)

Answer 45

True

Question 46

Day Co. owns 80% of Night Co. Day and Night reported profits of P200 and P100, respectively, in 20x1. There is no depreciation of fair value adjustment. The profit attributable to the owners of Day Co. is P280. (True/False)

Answer 46

True

Question 47

It arises when the parent obtains control over another entity indirectly through its direct holdings over another entity.

Answer 47

Complex Group Structure

Question 48

the parent's subsidiary has its own subsidiary (sometimes referred to as 'sub-subsidiary').

Answer 48

Vertical Group

Question 49

the parent has a direct controlling interest in at least one subsidiary, and in addition, both the parent and subsidiary together hold a controlling interest in another entity.

Answer 49

D-shaped (Mixed) group

Question 50

Another approach to assigning FVA to a subsidiary's net identifiable assets.

Answer 50

Push-down Accounting

Question 51

Under this accounting, FVA are directly recorded in the subsidiary's books.

Answer 51

Push-down Accounting

Question 52

This adjustment is made because the consideration transferred to the "sub-subsidiary" is partly made by the parent and partly by the direct subsidiary.

Answer 52

Indirect holding adjustment