QUIZZ 1-2

Which of the following statement(s) is / are correct with regard to preparation of consolidated financial
Statement?

i) To be a subsidiary a parent should hold 100% of its equity shares

ii) Consolidation merely addition together of two Statements of financial position
iii) In consolidation a subsidiary and an associate are treated identically
iv) Consolidated balance sheet excludes assets not owned by the group

a. ii&iv

b. i&ii

c. None

d. ii&iii

Under IFRS 3, acquired contingent liabilities are:

a. Included in goodwill

b. Included in the cost of combination, only if they can be reliably measured

c. Included in NCI

d . Always included in the cost of combination

At 1 January 20X4 Yogi acquired 80% of the share capital of Bear for $1,400,000. At that date the share
capital of Bear consisted of 600,000 ordinary shares of 50c each and its reserves were $50,000. The fair
value of the non-controlling interest was valued at
$525,000 at the date of acquisition.

In the consolidated statement of financial position of Yogi and its subsidiary Bear at 31 December 20X8,
what amount should appear for goodwill?

a. $1,575,000

b. $1,050,000

c. $630,000

d. $450,000

1.400.000+525.000-300.000-50.000=1.575.000
On 1 July 2019, A Ltd pays £870,000 to acquire the entire share capital of B Ltd. The equity of B Ltd on
that date consists of ordinary share capital of £400,000 and retained earnings of £210,000. The fair value
of the non-current assets of B Ltd on 1 July 2019 exceeds their carrying amount by £35,000. Tax rate
20%. The amount paid for goodwill by A Ltd is:
a. £225,000

b. £470,000

c. £232,000

d. £260,000
 870.000 - 80%*(400.000+210.00+35.000*80%)=232.000

On 1 January 2009, P Ltd paid £480,000 to acquire 65% of the ordinary share capital of Q Ltd. The

equity of Q Ltd on that date consisted of ordinary share capital of £200,000 and retained earnings of

£150,000. The fair value of the non-current assets of Q Ltd on 1 January 2009 exceeded their carrying

amount by £250,000. Goodwill arising on consolidation has su ered an impairment loss of 40% between

1 January 2009 and 31 December 2016. The goodwill gure which should be shown in the consolidated

statement of financial position at 31 December 2016 is:

a. £36,000

b. £151,500

c. £54,000

d. £78,000

(480.000-65%*600)*60%=54.000

IFRS 3:

a. Allows only the acquisition method or merger method

b. Allows only the unitings of interest method

c. Allows either the unitings of interest method, or the acquisition method

d. Allows only the acquisition method

Applying the acquisition method involves the following steps: (i)Identifying an acquirer; (ii)Measuring the cost of the
combination. (iii)Allocating, at the acquisition date, the cost of the combination to the assets acquired and liabilities and
contingent liabilities assumed. (iv)Amortizing the goodwill.

a. i – ii

b. i – iv

c. i – iii

d. ii – iii

Negative goodwill should be:

a. Allocated to non-current assets

b. Ignore

c. Matched to future losses

d. Recorded in the income statement

On 1 January 2013, E Ltd paid £560,000 to acquire 80% of the ordinary share capital of F Ltd. The equity of F Ltd on
that date consisted of ordinary share capital of £300,000 and retained earnings of £150,000. All of its assets and
liabilities were carried at fair value. On 31 December 2016, the retained earnings of E Ltd and F Ltd are £1,870,000 and
£65,000 respectively. Goodwill arising on consolidation has su ered an impairment loss of 70% since 1 January 2013.
The retained earnings gure which should be shown in the consolidated statement of financial position at 31 December
2016 is:
a. £1,708,000
b. £1,662,000

c. £1,725,000

d. £1,645,000

GW= 560.000-80%*(300.000+ 150.000)=200 ⇒ impairment loss = 200*70%=140.000

RE of F at acqui date = 150.000 ; RE of F at 31/12/2016=65.000 ⇒ giảm = 85.000

RE on consolidation FS = 1.870.000 - 85.000*80%- impairment loss of GW=1.662.000

At 1 January 20X6 Fred acquired 75% of the share capital of Barney for $750,000. At that date the share capital of
Barney consisted of 20,000 ordinary shares of $1 each and its reserves were $10,000. The fair value of the non-
controlling interest was valued at $150,000 at 1 January 20X6.

In the consolidated statement of financial position of Fred and its subsidiary Barney at 31 December 20X9, what
amount should appear for goodwill?

a. $870,000

b. $150,000

c. $720,000

d. $750,000

GW= 750.000 + 150.000 -30.000= 870.000

Which of the following statements is not a key feature of the acquisition method?

a.The goodwill being measured as the consideration transferred plus the amount of any NCI interest plus the

fair value of any previously held equity interest in the acquire less the fair value of the identi able net assets

acquired.

b. An acquirer being identi ed for each business combination amortization

c. The acquired identi able net assets being measured at the fair value

d. The cost of business combination being measured at fair value of the net assets received from the acquiree