FA-FFA IAS-27

1. IAS 27 defines consolidated financial statements as ‘the financial statements of a group presented as those of:

2. The objective of IAS 27 is to prescribe the accounting and disclosure requirements for investments in __________ when an entity prepares separate financial statements.

3. IAS 27 mandates which entities shall produce separate financial statements.

4. Consolidated financial statements are the financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented __________.

5. Separate financial statements are those presented by an entity in which the entity could elect, subject to the requirements of IAS 27, to account for its investments in subsidiaries, joint ventures and associates __________.

6. The financial statements of an entity that does not have a subsidiary, associate or joint venturer’s interest in a joint venture are not separate financial statements.

7. Which of the following statements is not true with regards to a parent that becomes an investment entity?

8. Dividends from a subsidiary, a joint venture or an associate are recognised in profit or loss unless the entity elects to use the __________, in which case the dividend is recognised as a reduction from the carrying amount of the investment.

9. Which of the following criteria shall be satisfied when a parent reorganises the structure of its group by establishing a new entity as its parent?

10. At the date of initial application, an investment entity that previously measured its investment in a subsidiary at cost shall instead measure that investment at fair value through profit or loss as if the requirements of this IFRS had always been effective.

11. At the date of initial application, an investment entity that previously measured its investment in a subsidiary at __________ through other comprehensive income shall continue to measure that investment at__________.

12. The cumulative amount of any fair value adjustment previously recognised in __________ shall be transferred to __________ at the beginning of the annual period immediately preceding the date of initial application.

13. At the date of initial application, an investment entity __________ make adjustments to the previous accounting for an interest in a subsidiary __________ it had previously elected to measure at fair value through profit or loss in accordance with IFRS 9.

14. If an investment entity has disposed of, or lost control of, an investment in a subsidiary before the date of initial application of the Investment Entities amendments, the investment entity is required to make adjustments to the previous accounting for that investment.

15. When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either:

16. The entity applies the same accounting for each category of investments.

17. The proposed change to IAS 27 will align the accounting principles across boundaries but some respondents feel that the use of the equity method in separate financial statements is inappropriate because the proposed amendment lacks a conceptual basis. What is the basis of the argument from respondents opposing the introduction of the equity method?

18. Originally, equity accounting was used as a consolidation technique for subsidiaries at a time when it was thought that acquisition accounting was inappropriate. Why was acquisition accounting originally thought to be inappropriate?

19. IAS 27 Separate Financial Statements does not currently permit equity accounting as an option for investments in separate financial statements. The IASB has been asked to restore this option and to this end, an exposure draft was issued in December 2013 entitled Equity Method in Separate Financial Statements (Proposed amendments to IAS 27). Why does the IASB wish to restore this option?

20. There is some doubt about the objective of separate financial statements. IAS 27 points out that the focus of such statements is on the financial performance of the assets as investments. In what circumstances are separate financial statements required?