Question 1

There are no disclosures specified by AASB 10/IFRS 10 Consolidated Financial Statements.

Accepted Answer

AASB 10/IFRS 10 does not require any specific disclosures. However, entities may need to disclose information to meet the objective of providing users of financial statements with information about the nature of its relationship with its subsidiaries, associates, and joint ventures.

Question 2

The preparation of consolidated financial statements for a group relieves subsidiaries within the group from preparing individual financial statements.

Accepted Answer

Subsidiaries within a group are still required to prepare their own individual financial statements for legal and regulatory purposes, even though consolidated financial statements are prepared at the group level to present the financial position and results of the group as a single economic entity.

Question 3

When a business combination is formed by the creation of a parent-subsidiary relationship, the parent will always be identified as the acquirer.

Accepted Answer

In a business combination resulting in a parent-subsidiary relationship, the parent is not always the acquirer; the determination of the acquirer is based on the guidance provided by accounting standards, which involves assessing factors such as relative voting rights, the composition of the governing body of the combined entity, and the terms of the exchange, among others.

Question 4

The formation of a new entity to acquire the shares of two (or more) other entities is an example of a business combination in accordance with AASB 3/IFRS 3 Business Combinations.

Accepted Answer

This statement is true. A business combination is defined by AASB 3/IFRS 3 as "a transaction or other event in which an acquirer obtains control of one or more businesses." This can occur through the acquisition of shares of other entities, the acquisition of assets, the assumption of liabilities, or other means.

Question 5

Potential voting rights that cannot be exercised or converted until a future date or until the occurrence of a future event are not taken into account when determining an entity's capacity to control another entity.

Accepted Answer

This is true according to the Accounting Standards Codification Topic 810-10-25-34. Contingent voting rights are not considered when assessing an entity's control over another entity.

Question 6

Power is defined in AASB 10/IFRS 10 Consolidated Financial Statements as the current ability to direct the relevant activities of an investee.

Accepted Answer

This is the correct definition of power as per AASB 10/IFRS 10.

Question 7

Unless the parent trades any debt or equity instruments on a securities exchange, the parent is relieved from the requirement to prepare consolidated financial statements.

Accepted Answer

Even if the parent does not trade any debt or equity instruments on a securities exchange, it may still be required to prepare consolidated financial statements in certain circumstances, such as if it has significant control over a subsidiary or if it has made guarantees or provided financial support to the subsidiary.

Question 8

Where there is a substantial non-controlling interest and the non-controlling shareholders do not object, AASB 10/IFRS 10 Consolidated Financial Statements allows such subsidiaries to be excluded from consolidation.

Accepted Answer

AASB 10/IFRS 10 requires all subsidiaries to be consolidated by the parent entity, regardless of the size of non-controlling interests or whether the non-controlling shareholders object to the consolidation.

Question 9

Where a parent is exempted from preparing consolidated financial statements under AASB 10/IFRS 10 Consolidated Financial Statements, they are still required to present separate financial statements under AASB 127/IAS 27 Separate Financial Statements.

Accepted Answer

Parents who are exempt from preparing consolidated financial statements still need to present separate financial statements as per AASB 127/IAS 27.

Question 10

Typical characteristics of an investment entity in accordance with IFRS 10 Consolidated Financial Statements include that it has more than one investment.

Accepted Answer

According to IFRS 10, an investment entity is defined as an entity that has more than one investment, holds investments for capital appreciation, and conducts its activities solely for the purpose of managing its investments. Therefore, having more than one investment is a typical characteristic of an investment entity.

Quiz 9: Consolidation: Controlled Entities