Question 1

AASB 10/IFRS 10 Consolidated Financial Statements requires that control be non-shared.

Accepted Answer

A) True 
 B)False

Question 2

According to AASB 12/IFRS 12 Disclosure of Interests in Other Entities, an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity is known as a:

Accepted Answer

A)  controlling entity. 
B)  structured entity. 
C)  dominant entity. 
D)  rights entity.

Question 3

Entities can only classify investments in other entities as subsidiaries if they actually exercise control over the financial and operating policies of an entity.

Accepted Answer

A) True 
 B)False

Question 4

Rights to variable returns from an investee include:

Accepted Answer

A)  returns from economies of scale. 
B)  remuneration from provision of services. 
C)  returns from denying or regulating access to a subsidiary's assets. 
D)  all of the above.

Question 5

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

A) True 
 B)False

Question 6

A subsidiary is an entity that:

Accepted Answer

A)  has significant influence over a parent entity. 
B)  exercises control over a parent entity. 
C)  has the power to control a parent entity. 
D)  is controlled by another entity.

Question 7

At balance date, Company A has 40% of the voting rights in Company B. In addition Company A holds potential voting rights in Company B amounting to 6% that are currently exercisable, and a further 9% of voting rights in Company B that can be exercised in two years' time. Which of the following statements is correct?

Accepted Answer

A)  Consolidated financial statements must be prepared for Company A and B in the current year. 
B)  Consolidated financial statements need not be prepared for Company A and B for the current year. 
C)  Consolidated financial statements must be prepared as Company A controls Company B at balance date. 
D)  Consolidated financial statements must be prepared as Company A has more than half of the voting rights in Company B at balance date.

Question 8

The key characteristic that determines when consolidated financial statements should be prepared is:

Accepted Answer

A)  the existence of transactions between the entities. 
B)  control. 
C)  substance over form. 
D)  significant influence.

Question 9

The consolidation process involves making adjustments to the individual financial statements and ledger accounts of the entities within the group.

Accepted Answer

A) True 
 B)False

Question 10

A group of entities comprised of Kerri Limited (parent entity), Georgia Limited (subsidiary entity) and Emily Limited (subsidiary entity) have the following inventory balances. - Kerri Limited $41 000
- Georgia Limited $14 000
- Emily Limited $12 000
Which of the following amounts is shown as the consolidated inventory balance in the consolidated financial statements?

Accepted Answer

A)  $12 000 
B)  $14 000 
C)  $26 000 
D)  $67 000

Exam 9: Consolidation: Controlled Entities

AASB 10/IFRS 10 Consolidated Financial Statements requires that control be non-shared.

According to AASB 12/IFRS 12 Disclosure of Interests in Other Entities, an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity is known as a:

Entities can only classify investments in other entities as subsidiaries if they actually exercise control over the financial and operating policies of an entity.

Rights to variable returns from an investee include:

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.

A subsidiary is an entity that:

The key characteristic that determines when consolidated financial statements should be prepared is:

The consolidation process involves making adjustments to the individual financial statements and ledger accounts of the entities within the group.