Accounting for Business Combinations Study
Guide Questions
Course Introduction
This course provides an in-depth understanding of accounting principles and practices related to business combinations, including mergers, acquisitions, and consolidations. Students will explore the application of relevant accounting standards such as IFRS and US GAAP, focusing on topics like purchase method vs. pooling of interests, valuation of acquired assets and liabilities, goodwill recognition, and preparation of consolidated financial statements. Emphasis is placed on practical case studies, analyzing real-world examples, and understanding the strategic implications of business combinations on financial reporting and decision-making. By the end of the course, students will be able to confidently account for complex business combinations and address the associated challenges in financial reporting.
Recommended Textbook
Accounting for Corporate Combinations and Associations 8th Australian Edition by Neal Arthur
Available Study Resources on Quizplus
11 Chapters
401 Verified Questions
401 Flashcards
Source URL: https://quizplus.com/study-set/3412 Page 2
Chapter 1: Text Objectives and Introduction to Consolidation
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/67752
Sample Questions
Q1) In AASB 3,the indicia of an acquiring entity's power to control the other combining entities in a business combination do not include the power to:
A) exercise more than half of the voting rights in another entity through the site of the voting power or by virtue of an agreement with other investors.
B) appoint or remove a majority of the members of the governing body of the acquired entities.
C) cast the majority of votes at meetings of the governing body.
D) none of the above.
Answer: D
Q2) If a parent entity is a reporting entity the group must also be a reporting entity. A)True
B)False
Answer: False
Q3) Ownership of more than 50% of the voting power will always represent control. A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: Principles of Consolidation
Available Study Resources on Quizplus for this Chatper
48 Verified Questions
48 Flashcards
Source URL: https://quizplus.com/quiz/67751
Sample Questions
Q1) Where can the investment in a subsidiary be found in a group's consolidated financial statements?
A) Statement of cash flows
B) Statement of financial position
C) Consolidation worksheet
D) Income statement
Answer: B
Q2) Goodwill is not an identifiable intangible asset because it is not separable.
A)True
B)False
Answer: True
Q3) The general purpose financial statements (GPFS)of a parent entity are prepared from the viewpoint of the:
A) group.
B) parent entity.
C) subsidiary.
D) non-controlling interest.
Answer: A
To view all questions and flashcards with answers, click on the resource link above. Page 4
Chapter 3: Fair Value Adjustments and Tax Effects
Available Study Resources on Quizplus for this Chatper
46 Verified Questions
46 Flashcards
Source URL: https://quizplus.com/quiz/67750
Sample Questions
Q1) A contingent liability recognised in a business combination will be recorded: A) in the subsidiary's accounts.
B) in the group accounts.
C) either A or B.
D) none of the above.
Answer: B
Q2) Revaluation of assets to fair value in a business combination will be accounted for: A) in the records of the subsidiary.
B) on consolidation.
C) either A or B.
D) none of the above.
Answer: C
Q3) Accounting standard AASB 3 Business Combinations requires the recognition of contingent assets in a business combination.
A)True
B)False
Answer: False
To view all questions and flashcards with answers, click on the resource link above.
Page 5
Chapter 4: Intra-Group Transactions
Available Study Resources on Quizplus for this Chatper
38 Verified Questions
38 Flashcards
Source URL: https://quizplus.com/quiz/67749
Sample Questions
Q1) Unrealised gains on the intragroup sale of depreciable assets are realised via depreciation charges over the remaining useful life of the asset.
A)True
B)False
Q2) Dividends paid by the parent company and all subsidiaries will be eliminated as consolidation adjustments.
A)True
B)False
Q3) A loss arising from an intragroup transfer of inventories can be regarded as an unrealised loss that will be recovered by the group in a sale to an outside party.
A)True
B)False
Q4) A consolidation adjustment will have a tax effect if:
A) it adjusts the carrying amount of an asset.
B) it adjusts the carrying amount of a liability.
C) it recognises assets and liabilities not recorded in accounting records of group companies.
D) all of the above.
To view all questions and flashcards with answers, click on the resource link above.
6
Chapter 5: Non-Controlling Interest
Available Study Resources on Quizplus for this Chatper
37 Verified Questions
37 Flashcards
Source URL: https://quizplus.com/quiz/67748
Sample Questions
Q1) Where the full goodwill on acquisition is recognised in the consolidated financial statements,any impairment loss will be allocated between parent interest and NCI on the same basis as profit or loss.
A)True
B)False
Q2) Is the proprietary concept of consolidation consistent with the proportional consolidation method?
Q3) Preference shares of a subsidiary not owned by the parent company will be included as part of the NCI.
A)True
B)False
Q4) The measurement of the NCI allocation will be based on the subsidiary company's equity account balances.
A)True
B)False
Q5) The effect of all intragroup transactions must be adjusted in calculating the NCI share of subsidiary profits.
A)True
B)False
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Partly-Owned Subsidiaries: Indirect
Non-Controlling Interest
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/67747
Sample Questions
Q1) The sequence of acquisition dates in a tiered group is irrelevant to the consolidation process for indirect NCI.
A)True
B)False
Q2) 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
Q3) Explain why indirect ownership interests are not relevant to determining control in a tiered corporate group.
Q4) Why does the multiple consolidation method adopt a revaluation approach to the net assets of sub-subsidiaries?
Q5) If the parent acquires the child after the child has established a controlling interest in the grandchild,then the acquisitions are referred to as sequential.
A)True
B)False
Q6) Discuss the disadvantages of the sequential consolidation method.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Consolidated Cash Flow Statements
Available Study Resources on Quizplus for this Chatper
27 Verified Questions
27 Flashcards
Source URL: https://quizplus.com/quiz/67746
Sample Questions
Q1) Why is cash flow from operating activities seen as a performance measure?
Q2) The issue of shares to purchase non-current assets will be disclosed:
A) as a financing activity.
B) as an investment activity.
C) as both a financing and investment activity.
D) in the note disclosure to the statement of cash flows.
Q3) AASB 107 requires the use of the direct method of calculating cash flows from operating activities.
A)True
B)False
Q4) Cash flows from operating activities can be calculated using:
A) the direct method.
B) the indirect method.
C) either the direct or indirect method.
D) none of the above.
Q5) A statement of cash flows can be prepared using:
A) the reconstruction of ledgers approach.
B) the formula approach.
C) the spreadsheet approach.
D) all of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 9
Chapter 8: Accounting for Joint Arrangements
Available Study Resources on Quizplus for this Chatper
39 Verified Questions
39 Flashcards
Source URL: https://quizplus.com/quiz/67745
Sample Questions
Q1) Midstream Ltd and Delta Ltd enter into a business undertaking to lease a 100-hectare vineyard from Pinot Ltd.There is a contractual agreement between the two companies whereby they share control and must agree on all strategic financial and operating decisions.The two companies appoint Todman Management Pty Ltd as the vineyard manager.A separate set of accounting databases is established for the undertaking and each investor contributes cash capital to the undertaking and holds the assets as tenants in common.Each of the investing companies enters into a separate agreement with the vineyard manager to sell the produce of the vineyard in the market on their behalf.The business undertaking is:
A) a joint venture operation because the investors have agreed to a sharing of control and to a sharing of the outputs of the vineyard.
B) a joint venture entity because the undertaking has been established as a separate entity in which there is a simple sharing of control.
C) a simple partnership in which two companies operate as partners in a business undertaking with the intention of making a profit.
D) none of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 10
Chapter 9: Accounting for Associates and Joint Ventures: the Equity Method
Available Study Resources on Quizplus for this Chatper
44 Verified Questions
44 Flashcards
Source URL: https://quizplus.com/quiz/67744
Sample Questions
Q1) Which of the following statements more adequately reflects the current accounting position in regards to accounting for an associate entity?
A) The reporting by the investor of dividend revenue under the cost method is perceived to be an adequate indicator of investment performance in the case of a significant investment.
B) Even with representation on the associate's board of directors, an investor cannot have the power to manipulate its reported earnings (through participation in the dividend policy decisions of the associate) and thus present a misleading picture of its earnings performance.
C) Because of the varying dividend policies of investees, it is unlikely that dividend income will provide a reliable indicator of the investment performance of any associate.
D) None of the above.
Q2) It is possible that different entities can respectively exert control and significant influence over an investee entity.
A)True
B)False
Q3) Discuss the basis of the equity carrying amount of the investment.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Translation and Consolidation of Foreign Currency Financial Statements
Available Study Resources on Quizplus for this Chatper
31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/67743
Sample Questions
Q1) When the functional currency of a foreign operation is a foreign currency,translation of financial statements is accomplished through which method?
A) Current rate method
B) Temporal method
C) Either current rate or temporal method
D) None of the above
Q2) Which of the following factors indicate that the functional currency of a foreign operation is that of the reporting entity?
A) The activities of the foreign operation are carried out as an extension of the activities of the reporting entity rather than being carried out with a significant degree of autonomy.
B) Transactions with the reporting entity are a high proportion of the activities of the foreign operation.
C) The day-to-day financing of the foreign operation is supplied by the reporting entity and the cash flows of the foreign operation directly affect the cash flows of the reporting entity.
D) All of the above.
To view all questions and flashcards with answers, click on the resource link above. Page 12
Chapter 11: Segment Reporting by Diversified Entities
Available Study Resources on Quizplus for this Chatper
30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/67742
Sample Questions
Q1) Discuss the issues involved in allocating revenues,profits and assets to segments.
Q2) Segment information must be disclosed:
A) on the face of the financial statements.
B) in a note to the financial statements.
C) either A or B.
D) none of the above.
Q3) Where the total revenue derived by the reportable segments of a group from the provision of goods or services to external customers is less than 75% of the total group sales revenue:
A) other components of the business are identified as reportable segments until the 75% threshold is reached.
B) other components are combined as a reportable segment until the 75% threshold is reached.
C) other components are combined in segments in which the combined segment revenue derived from external sales is 10% or more of the total external sales until the 75% threshold is reached.
D) none of the above.
To view all questions and flashcards with answers, click on the resource link above.
13