Deck 15: Consolidation: Indirect Non-Controlling Interests

Question 1

P Ltd owns 75% of A Ltd which owns 60% of B Ltd.What is the direct non- controlling interest in A Ltd?

A)40%
B)45%
C)25%
D)15%

Answer 1

C

Question 2

Where a parent (P)makes an investment in a subsidiary (S1)through the acquisition of shares on or before the subsidiary (S1)makes an investment in its subsidiary (S2),it is known as a/an:

A)non- sequential acquisition
B)sequential acquisition
C)direct acquisition
D)none of the above

Answer 2

B

Question 3

P Ltd owns 60% of A Ltd which owns 70% of B Ltd.B Ltd owns 85% of C Ltd,as well as owning 80% of D Ltd. What is the direct non- controlling interest in B Ltd?

A)15%
B)20%
C)40%
D)30%

Answer 3

D

Question 4

Using the information in question 23,what is the indirect parent entity interest in C Ltd?

A)22.4%
B)33.6%
C)35.7%
D)42%

Question 5

P Ltd owns 80% of A Ltd which owns 75% of B Ltd.What is the indirect non- controlling interest in B Ltd?

A)25%
B)60%
C)16%
D)15%

Question 6

A method of consolidating that involves a series of single- stage subconsolidations with the final consolidation of the parent after all the subconsolidations are completed is known as:

A)active consolidation
B)multiple consolidation
C)sequential consolidation
D)none of the above

Question 7

Using the information in question 23,what is the total indirect non- controlling interest in D Ltd?

A)46.4%
B)33.6%
C)9)6%
D)57.6%

Question 8

Which of the following statements is correct?

A)a parent entity can hold only direct ownership interests in a subsidiary
B)a parent entity can hold only indirect ownership interests in a subsidiary
C)a parent entity cannot control a subsidiary if its shareholding is less than 50%
D)a parent entity can hold both direct and indirect ownership interests in a subsidiary

Question 9

Which of the following statements is incorrect?

A)in sequential consolidation the direct ownership interest of the immediate parent entity would be used to eliminate pre- acquisition capital and reserves
B)the most important principle underlying the multiple consolidation method is that indirect ownership interests are relevant only to post- acquisition profits and changes in reserves
C)the sequential consolidation method is less cumbersome to apply than the multiple consolidation method
D)sequential consolidation and multiple consolidation both generate exactly the same results

Question 10

Which of the following statements is incorrect,assuming that the partial goodwill method is used?

A)the subsidiary's operating profit and retained earnings are not adjusted for goodwill impairment losses when calculating non- controlling interest
B)the indirect non- controlling interest (INCI)is not given a share of share capital because it does not own shares in the entity where the INCI is located
C)the DNCI must only be given a share of pre- acquisition equity
D)the direct non- controlling interest (DNCI)must be given a share of both pre- and post- acquisition equity

Question 11

P Ltd owns 60% of A Ltd which owns 90% of B Ltd.What is the indirect parent entity interest in B Ltd?

A)6%
B)40%
C)36%
D)54%

Question 12

A non- controlling interest that has an interest in a subsidiary as a result of having an interest in the parent of that subsidiary is referred to as a/an:

A)indirect non- controlling interest
B)passive non- controlling interest
C)direct non- controlling interest
D)none of the above

Question 13

An acquisition in which a parent (P)acquires shares in a subsidiary (S1)after that subsidiary (S1)has acquired shares in its subsidiary (S2)is referred to as a/an:

A)passive acquisition
B)active acquisition
C)non- sequential acquisition
D)sequential acquisition

Question 14

Explain the difference between sequential and non- sequential acquisition.

Question 15

A method of consolidating whereby the ultimate parent entity and all of its subsidiaries and their subsidiaries are consolidated simultaneously is referred to as:

A)non- sequential consolidation
B)multiple consolidation
C)sequential consolidation
D)indirect consolidation

Question 16

Which of the following statements is correct?

A)the DNCI share of operating profit and retained earnings must not be adjusted for unrealised profits/losses caused by intragroup transactions
B)the DNCI is not given a share of equity of the relevant subsidiary where the DNCI is located
C)the direct non- controlling interest (DNCI)is given a share of equity of the relevant subsidiary where the DNCI is located
D)none of the above

Question 17

Explain the differences between sequential and multiple consolidation.