Question 1

Which of these definitions is NOT correct?&#10;A)SIGNIFICANT INFLUENCE: the power to participate in the financial and operating policy decisions of the investee,but without control or joint control.&#10;B)ASSOCIATE: an entity which is not a subsidiary or joint venture of the investor,but where they hold significant influence has significant influence.&#10;C)EQUITY METHOD OF ACCOUNTING: the investors share of the profit and loss of investee is not included.&#10;D)EQUITY METHOD OF ACCOUNTING: investments initially recognized at cost,and adjusted thereafter for post- acquisition changes in the investors share

Accepted Answer

The definition of the equity method of accounting in option C is not correct. In the equity method of accounting, the investor's share of the profit and loss of the investee is included in the investor's financial statements.

Question 2

Which of these investments in X would NOT be exempt from the equity method?&#10;A)An investment held by AZ,a wholly owned subsidy of Z,who do not trade debt or equity instruments in a public market,do not file investments with a securities commission and Z provides consolidated financial statements available for public use which comply with IFRS.Z has consented to AZ not using the equity method&#10;B)An investment held by Y,held for sale in accordance with IFRS 5&#10;C)An investment held by F,a venture capital organisation&#10;D)An investment held by GG,a wholly owned subsidy of Z,who do not trade debt or equity instruments in a public market,do not file investments with a securities commission and Z provides consolidated financial statements available for public use which comply with IFRS.Z has not been consulted regarding AZ's use of the equity method

Accepted Answer

The correct answer is D because the exemption from the equity method requires that the parent company (in this case, Z) has been consulted and consents to the subsidiary not using the equity method. Since Z has not been consulted in option D, this investment would not be exempt from the equity method.

Question 3

IFRS define a joint venture as an arrangement where entities with joint control have rights to the assets and obligations for the liabilities

Accepted Answer

IFRS defines a joint venture as an arrangement where two or more parties have joint control, but it specifically refers to joint arrangements where the parties that have joint control of the arrangement have rights to the net assets of the arrangement, rather than rights to the assets and obligations for the liabilities, which describe a joint operation.

Question 4

Accounting for joint operations and joint ventures uses the same methods

Accepted Answer

Although joint operations and joint ventures are both types of collaborations between two or more parties, the accounting treatment for each differs. Joint operations are accounted for using the proportionate consolidation method, while joint ventures are accounted for using the equity method.

Question 5

IASB replaced IAS31 with IAS 28

Accepted Answer

IASB replaced IAS 31 with IFRS 11, not IAS 28. IAS 28 deals with investments in associates and joint ventures, while IFRS 11 focuses on joint arrangements.

Question 6

IFRS 11 does not include any disclosure requirements for joint ventures

Accepted Answer

IFRS 11 does not include any disclosure requirements for joint ventures because joint ventures are not considered to be separate entities under IFRS 11.

Question 7

IAS 28 defines an associate as an entity in which the investor has significant influence,and that is neither a subsidiary nor an interest in a joint venture.

Accepted Answer

This is the correct definition of an associate according to IAS 28.

Question 8

Under IAS 24,which of these would not be a related party to entity AX?&#10;A)BX,an entity also in the X group&#10;B)Y,an entity controlled by the spouse of a key manager of AX&#10;C)CAS,an entity located close to AX&#10;D)AZ,an entity which,like AX,is a joint venture of A group

Accepted Answer

According to IAS 24, related parties include an entity in the same group as the reporting entity, a close family member of a key manager, a joint venture in which the reporting entity is a partner, and any entity that has significant influence over or is controlled by the reporting entity. Therefore, BX, Y, and AZ would all be considered related parties to entity AX, but CAS would not.

Question 9

Which of these definitions is NOT correct?&#10;A)JOINT CONTROL: contractually agreed sharing of an arrangement when decisions about related activities are made&#10;B)JOINT OPERATION: where parties with joint control have access to net assets of the arrangement&#10;C)JOINT ARRANGEMENT: an arrangement shared dependent on a contractual agreement,and establishing joint control&#10;D)JOINT VENTURE: where parties with joint control have right to the net assets of the arrangement

Accepted Answer

Joint operation is incorrectly defined here. In a joint operation, parties with joint control have rights to the assets and obligations for the liabilities, not just access to net assets.

Question 10

Which of these is NOT true about transactions between a venturer and the joint venture?&#10;A)It is dealt with by IAS 28&#10;B)Assets transferred from the joint venture to the venturer recognize all gain and loss&#10;C)Assets transferred from the venture to the joint venture recognize only the gain and loss attributable to the interests of other investors&#10;D)The equity method is used

Accepted Answer

Assets transferred from the joint venture to the venturer only recognize the gain or loss attributable to the interests of other investors, not all gains and losses. This is in accordance with the equity method of accounting. The other options are true statements regarding transactions between a venturer and a joint venture, which are dealt with by IAS 28 and use the equity method of accounting.

Deck 29: Accounting for Associates, joint Arrangements and Related Party Disclosures