Deck 6: Partly-Owned Subsidiaries: Indirect Non-Controlling Interest

Question 1

Indirect NCI are entitled to a share of the pre acquisition equity of subsubsidiaries.

Answer 1

False

Question 2

Parent Ltd owns 20% of S1 Ltd and 80% of S2 Ltd.In addition S2 Ltd owns 70% of S1 Ltd.The total Parent Ltd interest in S1 Ltd is:

A) 20%
B) 76%
C) 56%
D) none of the above

Answer 2

B

Question 3

A subsubsidiary provides the following information: The subsubsidiary is owned 60% by its parent which is owned 80% by the ultimate parent
Retained profits at the date of acquisition $400
Profit for the year first $200
The total indirect NCI is:

A) $72
B) $48
C) $24
D) none of the above

Answer 3

C

Question 4

In a multiple consolidation the ownership interests of subsidiaries is determined using:

A) direct ownership interests
B) indirect ownership interests
C) both direct and indirect ownership interests
D) none of the above

Question 5

A owns 80% of B and B owns 60% of C.If C pays a dividend and B distributes the amount received to its own shareholders,the allocation of the dividend will be:

A) parent 48%, NCI 52%
B) parent 52%, NCI 48%
C) parent 100%
D) NCI 100%

Question 6

Cross shareholdings between subsidiaries are:

A) legal under the Corporations Act
B) illegal under the Corporations Act
C) not covered by the Corporations Act
D) none of the above

Question 7

A subsubsidiary is:

A) a subsidiary of a parent company
B) a subsidiary of a subsidiary company
C) either A or B
D) none of the above

Question 8

The sequence of acquisition dates in a tiered group is irrelevant to the consolidation process for indirect NCI

Question 9

The sequential consolidation method uses a 'top down' approach

Question 10

Circular shareholdings arise where:

A) a subsidiary holds an equity interest in its parent
B) a subsubsidiary holds an interest in another subsidiary of its parent
C) a subsidiary holds an interest in a subsubsidiary
D) none of the above

Question 11

When a parent does not have an ownership interest in a subsidiary the NCI is 100%

Question 12

Using the data from Question 4 but assuming that Parent Ltd controls S2 Ltd without holding any shares in S2 Ltd.The Parent Ltd indirect interest in S1 Ltd is:

A) 100%
B) 70%
C) nil
D) none of the above

Question 13

Using the data from Question 2 the Parent Ltd NCI indirect ownership interest in S2 is:

A) 10%
B) 40%
C) 6%
D) none of the above

Question 14

A Ltd owns 80% of B Ltd and B Ltd owns 60% of C Ltd,Using the sequential consolidation method the sequence of consolidation would be:

A) A with B and then consolidated A with C
B) B with C and then consolidated B with A
C) A, B and C together
D) none of the above

Question 15

Direct plus indirect ownership interests must always sum to 100% for a group

Question 16

Parent Ltd owns 90% of S1 Ltd and S1 Ltd owns 60% of S2 Ltd.Parent Ltd's indirect ownership interest in S2 Ltd is:

A) 90%
B) 60%
C) 54%
D) none of the above

Question 17

The parent-son-grandson description applies to corporate groups involving indirect ownership interests

Question 18

The calculation of notional profits of entities with cross holdings is required to:

A) determine the parent ownership interest in the subsidiaries
B) determine the NCI ownership interest in the subsidiaries
C) determine both the parent and NCI ownership interests in the subsidiaries
D) none of the above

Question 19

Using the data from Question 4 the total NCI in S1 Ltd is:

A) 10%
B) 14%
C) 24%
D) none of the above

Question 20

The concept of indirect ownership interests is used in:

A) the multiple consolidation method
B) the sequential consolidation method
C) both A and B
D) in neither method

Question 21

Why does the multiple consolidation method adopt a revaluation approach to the net assets of subsubsidiaries?

Question 22

Is the proportionate interest goodwill method consistent with not allocating goodwill impairment losses against the indirect NCI?

Question 23

Discuss the current position of the Corporations Act in respect to reciprocal ownership interests.

Question 24

Explain why indirect ownership interests are not relevant to determining control in a tiered corporate group.

Question 25

Why is the indirect NCI not entitled to any share of pre acquisition equity under the multiple consolidation method?

Question 26

Discuss the disadvantages of the sequential consolidation method.

Question 27

Circular shareholdings are allowed under the Corporations Act