Question 1

The Corporations Act requires a remuneration report to appear in the Director's Report.

Accepted Answer

A) True 
 B)False  True

Question 2

Reasons for the requirement to disclose related-party transactions include:

Accepted Answer

A)  These transactions will always be eliminated in a consolidation so otherwise there would be no record of them in a set of consolidated accounts. 
B)  There is a history of corporate scandals involving related-party transactions in Australia, the US, the UK and Canada. 
C)  There is a risk that the auditor may be a related party and this must be disclosed. 
D)  There is a history of corporate scandals involving related-party transactions in Australia, the US, the UK and Canada and a risk that the auditor may be a related party and this must be disclosed. 
A)  These transactions will always be eliminated in a consolidation so otherwise there would be no record of them in a set of consolidated accounts. 
B)  There is a history of corporate scandals involving related-party transactions in Australia, the US, the UK and Canada. 
C)  There is a risk that the auditor may be a related party and this must be disclosed. 
D)  There is a history of corporate scandals involving related-party transactions in Australia, the US, the UK and Canada and a risk that the auditor may be a related party and this must be disclosed. B

Question 3

Which of the following is not a related party within the provisions of AASB 124 Related Party Disclosures?

Accepted Answer

A)  associates 
B)  non-executive directors 
C)  executive personnel 
D)  bankers 
A)  associates 
B)  non-executive directors 
C)  executive personnel 
D)  bankers D

Question 4

Discuss the main features of the recently reissued policy statement on director and executive pay by the Australian Shareholders' Association.

Accepted Answer

The Australian Shareholders' Association

Question 5

According to AASB 124,disclosures required for transactions with related parties in the wholly owned group include:

Accepted Answer

A)  the aggregate amounts receivable from and payable to related parties as at the reporting date classified into current and non-current categories. 
B)  aggregate number of shares and options held by the related party as at the reporting date including the class of share, unit, option or other equity instrument. 
C)  the nature of terms and conditions of share and option transactions. 
D)  the fair value of any equity transaction with any related party as at the reporting date. 
A)  the aggregate amounts receivable from and payable to related parties as at the reporting date classified into current and non-current categories. 
B)  aggregate number of shares and options held by the related party as at the reporting date including the class of share, unit, option or other equity instrument. 
C)  the nature of terms and conditions of share and option transactions. 
D)  the fair value of any equity transaction with any related party as at the reporting date.

Question 6

Discuss the objective of AASB 124 Related Party Disclosures.

Accepted Answer

The existence of a related party relatio

Question 7

If there had been a related-party transaction during the period,the disclosures required by AASB 124 director-related entities include:

Accepted Answer

A)  annual income in aggregate amount and the number in $10 000 bands. 
B)  retirement benefits. 
C)  aggregate number of shares, units, options and other equity instruments acquired and disposed of, by issuing entity and class of share, unit, option or equity instrument. 
D)  their names. 
A)  annual income in aggregate amount and the number in $10 000 bands. 
B)  retirement benefits. 
C)  aggregate number of shares, units, options and other equity instruments acquired and disposed of, by issuing entity and class of share, unit, option or equity instrument. 
D)  their names.

Question 8

Cobourg Ltd has following transactions during the year:
$$\begin{array} { | l | l | } 
\hline \text { I } & \text { Sells goods to its parent entity at cost } \
\hline \text { II } & \text { Sells goods to its subsidiary at recommended retail price } \
\hline \text { III } & \text { Director is reimbursed his air ticket to attend a board meeting } \
\hline \text { IV } & \begin{array} { l } 
\text { Director's home renovation costs paid by the entity in exchange for interest } \
\text { bearing loan at market rates }
\end{array} \
\hline \mathrm { V } & \text { Dividends paid to key management personnel as a shareholder of the entity } \
\hline \mathrm { VI } & \text { Retirement of key management personnel } \
\hline
\end{array}$$
Which of the following lists all the related-party transactions required to be disclosed in AASB 124 Related Party Disclosures?

Accepted Answer

A)  I and II 
B)  III and IV 
C)  II, IV and V 
D)  I, II, IV and VI 
A)  I and II 
B)  III and IV 
C)  II, IV and V 
D)  I, II, IV and VI

Question 9

Which of the following statements is not in accordance with AASB 124 Related Party Disclosures?

Accepted Answer

A)  A related-party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. 
B)  If there have been transactions between related parties, an entity shall disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. 
C)  Transactions between the reporting entity and its key management personnel are deemed material. 
D)  In AASB 124 Related Party Disclosures, two entities having a director in common are assumed related parties. 
A)  A related-party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged. 
B)  If there have been transactions between related parties, an entity shall disclose the nature of the related party relationship as well as information about the transactions and outstanding balances necessary for an understanding of the potential effect of the relationship on the financial statements. 
C)  Transactions between the reporting entity and its key management personnel are deemed material. 
D)  In AASB 124 Related Party Disclosures, two entities having a director in common are assumed related parties.

Question 10

Transactions involving related parties cannot be presumed to be carried out on an arm's length basis.

Accepted Answer

A) True 
 B)False

Question 11

The disclosure requirements of AASB 124 include:

Accepted Answer

A)  disclosure of the fair value of a transaction with a related party. 
B)  restatement of the transaction to its fair value in the accounts of the entity. 
C)  comparative transactions with non-related parties to form a basis for a fair value assessment by users of the accounts. 
D)  none of the given answers. 
A)  disclosure of the fair value of a transaction with a related party. 
B)  restatement of the transaction to its fair value in the accounts of the entity. 
C)  comparative transactions with non-related parties to form a basis for a fair value assessment by users of the accounts. 
D)  none of the given answers.

Question 12

The Corporations Act requires shareholder approval for any agreement to pay a prospective executive or director a retirement benefit greater than their final salary multiplied by their number of years of service (with an upper limit of seven years).

Accepted Answer

A) True 
 B)False

Question 13

Related-party transactions pose serious risks to the reporting entity and generate no benefits.

Accepted Answer

A) True 
 B)False

Question 14

Disclosure of related-party transactions is required because knowledge of related-party transactions,outstanding balances and relationships may affect assessments of an entity's operations by users of financial reports.

Accepted Answer

A) True 
 B)False

Question 15

The definition of control adopted in AASB 124 relies on the power to:

Accepted Answer

A)  agree. 
B)  govern. 
C)  vote. 
D)  manage. 
A)  agree. 
B)  govern. 
C)  vote. 
D)  manage.

Question 16

In accordance with AASB 124,the categories of compensation to key management personnel required to be disclosed include:

Accepted Answer

A)  short-term employee benefits. 
B)  post-employment benefits. 
C)  termination benefits 
D)  all of the given answers. 
A)  short-term employee benefits. 
B)  post-employment benefits. 
C)  termination benefits 
D)  all of the given answers.

Question 17

AASB 124 defines directors as including:

Accepted Answer

A)  any employee of the entity whether or not they are validly appointed to occupy the position. 
B)  any person that directs an entity in its financial and operating activities regardless of whether they are known by the title of director. 
C)  any person in accordance with whose instructions the directors of an entity are accustomed to act. 
D)  any person that directs an entity in its financial and operating activities regardless of whether they are known by the title of director and any person in accordance with whose instructions the directors of an entity are accustomed to act. 
A)  any employee of the entity whether or not they are validly appointed to occupy the position. 
B)  any person that directs an entity in its financial and operating activities regardless of whether they are known by the title of director. 
C)  any person in accordance with whose instructions the directors of an entity are accustomed to act. 
D)  any person that directs an entity in its financial and operating activities regardless of whether they are known by the title of director and any person in accordance with whose instructions the directors of an entity are accustomed to act.

Question 18

What is the rationale for disclosing related-party transactions with key management personnel regardless of its materiality?

Accepted Answer

Key management personnel are considered

Question 19

Discuss the disclosure requirements instituted in CLERP 9 bill in relation to director and executive remuneration.

Accepted Answer

CLERP 9 included a number of requirement

Question 20

Transactions with and amounts receivable from or payable to a key management person and their related parties are excluded from additional disclosures when:

Accepted Answer

A)  the transactions occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those that it is reasonable to expect the entity would have adopted if dealing with an unrelated person. 
B)  the information about them does not have a potential to affect adversely decisions about the allocation of scarce resources made by the users of the financial report, or the discharge of accountability by the key management person. 
C)  these are trivial or domestic in nature. 
D)  All of the given answers are correct. 
A)  the transactions occur within a normal employee, customer or supplier relationship on terms and conditions no more favourable than those that it is reasonable to expect the entity would have adopted if dealing with an unrelated person. 
B)  the information about them does not have a potential to affect adversely decisions about the allocation of scarce resources made by the users of the financial report, or the discharge of accountability by the key management person. 
C)  these are trivial or domestic in nature. 
D)  All of the given answers are correct.

Exam 25: Related Party Disclosures

The Corporations Act requires a remuneration report to appear in the Director's Report.

Reasons for the requirement to disclose related-party transactions include:

Which of the following is not a related party within the provisions of AASB 124 Related Party Disclosures?

Discuss the main features of the recently reissued policy statement on director and executive pay by the Australian Shareholders' Association.

According to AASB 124,disclosures required for transactions with related parties in the wholly owned group include:

Discuss the objective of AASB 124 Related Party Disclosures.

If there had been a related-party transaction during the period,the disclosures required by AASB 124 director-related entities include:

Which of the following statements is not in accordance with AASB 124 Related Party Disclosures?

Transactions involving related parties cannot be presumed to be carried out on an arm's length basis.

The disclosure requirements of AASB 124 include:

The Corporations Act requires shareholder approval for any agreement to pay a prospective executive or director a retirement benefit greater than their final salary multiplied by their number of years of service (with an upper limit of seven years).

Related-party transactions pose serious risks to the reporting entity and generate no benefits.

Disclosure of related-party transactions is required because knowledge of related-party transactions,outstanding balances and relationships may affect assessments of an entity's operations by users of financial reports.

The definition of control adopted in AASB 124 relies on the power to:

In accordance with AASB 124,the categories of compensation to key management personnel required to be disclosed include:

AASB 124 defines directors as including:

What is the rationale for disclosing related-party transactions with key management personnel regardless of its materiality?

Discuss the disclosure requirements instituted in CLERP 9 bill in relation to director and executive remuneration.

Transactions with and amounts receivable from or payable to a key management person and their related parties are excluded from additional disclosures when:

An Overview of the Australian External Reporting Environment

The Conceptual Framework of Accounting and Its Relevance to Financial Reporting

Theories of Accounting

An Overview of Accounting for Assets

Depreciation of Property, plant and Equipment

Revaluations and Impairment Testing of Non-Current Assets

Inventory

Accounting for Intangibles

Accounting for Heritage Assets and Biological Assets

An Overview of Accounting for Liabilities

Accounting for Leases

Accounting for Employee Benefits

Share Capital and Reserves

Accounting for Financial Instruments

Revenue Recognition Issues

The Statement of Comprehensive Income and Statement of Changes in Equity

Accounting for Share-Based Payments

Accounting for Income Taxes

The Statement of Cash Flows

Accounting for the Extractive Industries

Accounting for General Insurance Contracts

Accounting for Superannuation Plans

Events Occurring After the End of the Reporting Period

Segment Reporting

Earnings Per Share

Accounting for Group Structures

Further Consolidation Issues I: Accounting for Intragroup Transactions

Further Consolidation Issues II: Accounting for Non-Controlling Interests

Further Consolidation Issues IV: Accounting for Changes in the Degree of Ownership of a Subsidiary

Accounting for Equity Investments,including Investments in Associates and Joint Arrangements

Accounting for Foreign Currency Transactions

Translating the Financial Statements of Foreign Operations

Accounting for Corporate Social Responsibility

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