Question 1

A group presents its financial statements in A$.

The goodwill of its only foreign subsidiary was measured at B$100,000 at acquisition. There have been no impairments to this goodwill.

Exchange rates (where A$/B$ is the number of B$'s to each A$) are as follows:

The value of goodwill to be included in the group's statement of financial position in respect of its foreign subsidiary for the year ended 31 December 20X4 is:

Options :

A : A$75,758.

B : A$66,667.

C : A$150,000.

D : A$132,000.

Answer: A

Question 2

AB and EF are located in the same country and prepare their financial statements to 31 October in accordance with International Accounting Standards. EF supplies AB with a component that is vital to AB's product range. AB is considering acquiring a controlling interest in EF by 31 December 20X4 in order to guarantee future supply. The Board of EF has indicated that such an approach would be postively considered. AB would use its control to make AB the sole customer of EF.

The Finance Director of AB has been granted access to EF's management accounts and has conducted some initial analysis from the financial press. The results togther with comparisons for AB for the year to 31 October 20X4 are presented below:

AB and EF are forecasting revenues of S1,500,000 and $700,000 respectively for the year ended 31 October 20X5.

Which of the followingindependent optionswouldexplainthe differencebetween thegearingratios of AB and EF at 31 October 20X4?

Options :

A : EF-s average cost of borrowing is significantly lower than that of AB and EF has taken advantage of that.

B : EF has a policy of revaluing non current assetswhereas AB does not.

C : EF made a bonus issue of shares from retained earnings during the year whereas AB did not.

D : EF-s market value of sharesat 31 October 20X4 is lower than that of AB.

Answer: A

Question 3

When accounting for a finance lease under IAS 17 Leases, which TWO of the following are recognised in the statement of profitor loss?

Options :

A : Finance cost element of the lease payments

B : Depreciationof the leased asset

C : Lease payments paid

D :

Lease payments payable

E : Capital repayment element of the lease payments

Answer: A,B

Question 4

LM has made the following share purchases during the year:

* Purchased 55% of the equity share capital of OP.

* Purchased 45% of the equity share capital of QR.LM have the power to appoint the majority of board members on the QR board.

* Purchased 30% of the equity share capital of ST. LM is represented by one director on the main board of ST which has five members in total. The other 70% of ST's equity share capital is owned by a single company, UV.

The Managing Director has told you that OP has performed well, but both QR and ST have not performed as expected. He is therefore pleased thatOP will be included as a subsidiaryand that QR and ST will only be included as investments in the group financial statements.

In accordance with the ethical principle of professional competence and due care how should the investments in OP, QR and ST be treated in the group financial statements?

Options :

A : OP and QR should be consolidated and ST should be equity accounted

B : OP should be consolidated and QR and ST should be equity accounted.

C : OP should be consolidated, QR should be equity accounted and ST should be valued at cost.

D : OP and QR should be equity accounted and ST should be valued at cost.

Answer: A

Question 5

On 1 January 20X7 GH purchased plant and equipment at a cost of $400,000. The temporary differences in respect of this plant and equipment at 31 December 20X7 and 20X8 have been calculated as follows:

Assume that there are no other temporary differences in the periods and that the corporate income tax rate is 25%. GH is expected to have significant taxable profits in the future.

Which of the following is the correct impact in GH's statement of financial position at 31 December 20X8 in respect of deferred tax?

Options :

A : Increase in the deferred tax asset.

B : Increase in the deferred tax liability.

C : Decrease in the deferred tax asset.

D : Decrease in the deferred tax liability

Answer: A

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