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1. Alpha Ltd (Alpha) owns 25 per cent of the shares (and voting rights) in Beta Ltd (Beta) but has no representation on the board of directors of the company. In accordance with IAS 28 Investments in Associates and Joint Ventures, Alpha
2. Which one of the following events would change the amount of the item ‘Investment in associate’ in a company’s consolidated financial report?
3. When an investment in an associate is acquired, the initial amount of the investment should be
4. Raven Ltd (Raven) is a parent entity that invested in an associate. In accordance with IFRS 3 Business Combinations, Raven determined that the acquisition involved a gain of $200 000. In accordance with IAS 28 Investments in Associates and Joint Ventures, the gain should be
5. An associate is an entity in which the investor has significant influence, but which is neither a subsidiary nor a joint venture of the investor. Which of the following is true regarding the definition of `significant influence`?
6. IAS 28 states that profits and losses resulting from `upstream` and `downstream` transactions between an investor including its consolidated subsidiaries and an associate or joint venture are recognised only to the extent of the unrelated investors` interests in the associate or joint venture. Upstream transactions are sales of assets from an associate to the investor and downstream transactions are sales of assets by the investor to the associate. How would unrealised gains in downstream transactions normally be treated?
7. The ED in November 2012 notes that an investor may discontinue the use of the equity method for various reasons including where the investment in the investee becomes a subsidiary or a financial asset. What does the ED propose should be the accounting treatment when an investor discontinues the use of the equity method for any reason?
8. A joint venture is a joint arrangement where the parties that have joint control, have rights to the arrangement`s net assets. How are joint ventures accounted for?
9. On initial recognition, the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit or loss of the investee after the date of acquisition. How is an entity’s interest in a joint venture or associate determined?
10. Under the equity method, the investment is initially recognised at cost and adjusted to recognise the investor`s share of the profit or loss and other comprehensive income of the investee. Additionally, the investment is reduced by distributions received from the investee. However, IAS 28 is silent on how to treat other changes in the net assets of the investee in the investor`s account. What have the IASB proposed in the ED issued in November 2012?
11. Johnson paid $1•2 million for a 30% investment in Treem’s equity shares on 1 August 2014. Treem’s profit after tax for the year ended 31 March 2015 was $750,000. On 31 March 2015, Treem had $300,000 goods in its inventory which it had bought from Johnson in March 2015. These had been sold by Johnson at a mark-up on cost of 20%. Treem has not paid any dividends.
On the assumption that Treem is an associate of Johnson, what would be the carrying amount of the investment in Treem in the consolidated statement of financial position of Johnson as at 31 March 2015?
12. IAS 28 shall be applied by all entities that are investors with __________ an investee.
13. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies.
14. If an entity holds, directly or indirectly, __________ of the voting power of the investee, it is presumed that the entity has significant influence, unless it can be clearly demonstrated that this is not the case.
15. Under which of the following circumstances does an entity lose significant power over the investee?
16. Which one of the following events would change the amount of the item ‘Investment in associate’ in a company’s consolidated financial report?
17. When an investment in an associate is acquired, the initial amount of the investment should be
20. In relation to goodwill arising from a business combination, which one of the following statements is in accordance with IFRS 3 Business Combinations?