Question 1

Which of these is NOT a difference between carry over accounting and acquisition accounting?&#10;A)Carry over accounting requires an acquisition date,acquisition accounting doesn't&#10;B)Carry over accounting does not recognise goodwill,acquisition accounting does&#10;C)Carry over accounting does not require revaluation of items at fair value,but acquisition accounting does&#10;D)Carry over accounting involves combining items at book value,whereas acquisition accounting requires combining at fair values.

Accepted Answer

Carry over accounting and acquisition accounting both require an acquisition date, making this statement incorrect as a difference between the two methods.

Question 2

Which of these is not an alternative to acquisition accounting?&#10;A)Entity accounting&#10;B)Pooling of interests accounting&#10;C)Equity accounting&#10;D)Carry over accounting

Accepted Answer

Entity accounting is not a recognized method for accounting for business combinations, whereas pooling of interests, equity, and carry over accounting are alternatives to acquisition accounting.

Question 3

Which is NOT true about pooling of interests accounting for business combinations?&#10;A)IFRS 3 which replaced IAS 22 confirmed use of pooling of interests for true mergers&#10;B)The assets and liabilities of entities are combined on the basis of their book values&#10;C)It was identified by IAS 22&#10;D)It is required in a situation of ' uniting of interests'

Accepted Answer

Pooling of interests is a method of accounting for business combinations that was phased out and is no longer allowed under IFRS 3, which replaced IAS 22. IFRS 3 requires the use of the acquisition method instead.

Question 4

The IFRS allows use of all alternative concepts of accounting for business combinations

Accepted Answer

The IFRS provides specific guidance on how to account for business combinations and does not allow the use of alternative concepts of accounting.

Question 5

Which is NOT true about proportional consolidation?&#10;A)There is no non- controlling interest&#10;B)It is allowed under IFRS 11 for a parent - subsidiary relationship&#10;C)it is not allowed under IFRS 11 for a parent- subsidiary relationship&#10;D)It is a traditional option in accounting for joint ventures.

Accepted Answer

Proportional consolidation is not allowed under IFRS 11 for parent-subsidiary relationships. IFRS 11 requires the use of the equity method for joint ventures, moving away from proportional consolidation.

Question 6

Which of the following is not a feature of the entity concept?&#10;A)That the group is accounted for as a unit,and makes no distinction between shareholders&#10;B)That the Consolidated financial statement is prepared to be primarily of use to the shareholders of the parent entity&#10;C)Non-controlling interests are part of equity&#10;D)Net comprehensive income includes the net income attributable to all shareholders

Accepted Answer

The feature mentioned in option B is not related to the entity concept, but rather to the preparation of consolidated financial statements. The entity concept refers to the idea that a company is a separate legal entity from its owners or shareholders, and that financial statements should report the activities and financial position of the company as a whole, rather than just the shareholders' interests. Options A, C, and D all relate to the entity concept.

Question 7

IFRS 3 is more recent than IAS 22

Accepted Answer

IFRS 3 was issued in 2008, while IAS 22 was issued in 1983. This means that IFRS 3 is more recent than IAS 22.

Question 8

IAS 28 and 31 both apply to Equity Accounting

Accepted Answer

Both IAS 28 (Investments in Associates and Joint Ventures) and IAS 31 (Interests in Joint Ventures) provide guidance on the accounting treatment for equity investments, including the equity accounting method.

Question 9

An advantage of pooling of interests accounting is that it provides superior quality information when compared to acquisition acounting

Accepted Answer

Pooling of interests accounting often masks the true financial impact of a merger or acquisition by combining the financial statements of the merging companies without recognizing the premium paid over the book value of the acquired company, potentially leading to less transparent and lower quality financial information compared to acquisition accounting, which requires assets and liabilities to be recorded at fair market values.

Question 10

IFRS 3 applies the parent concept when preparing consolidated financial statements

Accepted Answer

IFRS 3 applies the entity concept, not the parent concept, when preparing consolidated financial statements, focusing on the combined entity as a whole rather than prioritizing the parent's perspective.

Deck 28: Alternative Concepts on Consolidation and Business Combinations