Statement I: A consolidation occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes. Statement II: In a consolidation, all of the combining entities transfers their net assets to form a new entity or sometimes referred as roll-up or put-together transaction. a. True, True b. False, False c. False, True d. True, False

Statement I: A consolidation occurs when the entity that issues securities (the legal acquirer) is identified as the acquiree for accounting purposes. Statement II: In a consolidation, all of the combining entities transfers their net assets to form a new entity or sometimes referred as roll-up or put-together transaction. a. True, True b. False, False c. False, True d. True, False

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Acquisition accounting requires an acquirer and an acquirer to be identified for every business combination. Where a new entity (H) is created and two pre-existing entities, S and A, which of these entities will be designated as the acquirer? a. H b. S or A c. S d. A
Revenue is recognized when it is earned; therefore revenue earned for a consolidated entity occurs when there is a sale to outside entity Select one: True False
In an asset acquisition: a. A consolidation must be prepared whenever financial statements are issued. b. The acquiring company deals only with existing shareholders, not the company itself. c. The assets and liabilities are recorded by the acquiring company at their book values. d. Statements for the single combined entity are produced automatically and no consolidation process is needed.
Statement I: For each business combination, an acquiree is always identified.Statement II: The acquisition date is the date where the acquiree obtains control over the acquirer. a. True, False b. True, True c. False, True d. False, False
Consolidation financial statements are prepared when a parent-subsidiary relationship exists in recognition of the accounting principle concept of: a. Reliability b. Entity c. Materiality d. Going Concern
The term ‘business combination’ is defined in AASB 3/IFRS 3 Business Combinations to include: I. True mergers or mergers of equals. II. An acquisition of a non-current asset. III. A transaction or other event in which a group of assets is acquired by an entity. IV. A transaction or other event in which an acquirer obtains control of one or more businesses. a. I. and II. only. b. I. and IV only. c II., III. and IV only. d. I., II., III. and IV
Statement 1: In the financial settlement of a contingent consideration classified as financial liability, the amount shall be remeasured at fair value with any gain or loss included in profit or loss. Statement 2: If a new entity is formed to issue equity interests to effect a business combination one of the combining entitites that existed before the combination shall be identified as the acquirer. Which statement/s is TRUE?
An entity shall determine whether a transaction or other event is a business combination by applying the definition in PFRS 3, which requires that: a. All of the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination. b. All of the combining entities transfer their net assets, or the owners of those entities transfer their equity interests, to a newly formed entity. c. The assets acquired and the liabilities assumed constitute a business. d. All of the above.
S1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. S2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. A. Only S2 is correct B. Both statements are incorrect C. Only S1 is correct D. Both statements are correct
Consolidation accountinga. eliminates all liabilities.b. reports the receivables and payables of the parent company only.c. combines the accounts of the parent company and its subsidiary companies.d. all of the above
When an entity sells a non-current asset at a profit to another entity within the same group, which of the following adjustments is necessary on consolidation? Select one: a. Dr Asset, DR Gain on sale b. Dr Gain on sale, CR Asset c. Dr Gain on sale, CR Cash d. Dr Asset, CR Cash
Statement 1: The preparation of consolidated financial statements after acquisition is materially different concept from preparing them in the acquisition date in the sense that reciprocal accounts are eliminated and remaining balances are combined. Statement 2: All revenues and expenses of individual consolidating companies arising from transactions and actions with affiliated companies are included in the consolidated financial statements. a. Only Statement 1 is correct b. Both statements are correct c. Only Statement 2 is correct d. Both statements are incorrect