1 On January 1, 20X1, ABC Co. purchased machinery for $500,000.

The estimated useful life is 5 years with a residual

If the company uses straight-line depreciation, what is the annual depreciation charge?
A) $90,000 B) $100,000 C) $85,000 D) $95,000

2 Which of the following costs should NOT be capitalized as part of PPE? A) Import duties
B) Regular maintenance costs C) Site preparation costs D) Professional fees directly attributable to the acquisition

3 A company revalues its building from $800,000 to $900,000. The accumulated depreciation at the time of revaluati
A) $0 B) $200,000 C) $225,000 D) $250,000

4 An asset with a carrying amount of $150,000 is impaired. Its fair value less costs to sell is $120,000, and its value in
A) $20,000 B) $30,000 C) $10,000 D) $0

5 Which statement about borrowing costs is correct under IAS 23?

A) All borrowing costs must be expensed immediately
B) Borrowing costs must be capitalized for all assets
C) Borrowing costs must be capitalized for qualifying assets
D) Borrowing costs capitalization is optional for all assets

6 A machine costing $400,000 was purchased on January 1, 20X1. On December 31, 20X3, it was revalued to $280,00
The original useful life was 8 years with no residual value. What is the depreciation charge for 20X4?
A) $50,000 B) $70,000 C) $56,000 D) $40,000

7 What is the correct treatment of subsequent expenditure on PPE?

A) Always expensed
B) Always capitalized
C) Capitalized if it enhances future economic benefits
D) Capitalized only if it maintains the asset's performance

8 An asset's cost is $500,000, accumulated depreciation is $200,000, and it suffers an impairment loss of $50,000. Wh
A) $300,000 B) $250,000 C) $450,000 D) $350,000

9 When should depreciation of an asset begin?

A) When the asset is purchased
B) When the asset is paid for
C) When the asset is available for use D) At the start of the next accounting period

10 A company exchanges an old machine (carrying amount $80,000, fair value $95,000) for a new machine requiring a
The fair value of the new machine is $115,000. What is the cost of the new machine?
A) $100,000 B) $115,000 C) $95,000 D) $80,000

11 A company purchases equipment for $800,000. Additional costs include:

Installation: $50,000
Training staff: $30,000
Testing: $20,000 What is the capitalized cost?
 A) $800,000 B) $850,000 C) $870,000 D) $900,000

12 What is the correct treatment for day-to-day servicing costs of PPE?

A) Capitalize as part of asset cost
B) Recognize in profit or loss as incurred
C) Capitalize if above a certain threshold
D) Add to revaluation reserve

13 An asset with a cost of $400,000 and accumulated depreciation of $150,000 is revalued to $300,000. Using the gros
A) $50,000 B) $100,000 C) $150,000 D) $200,000

14 Which depreciation method is most appropriate for an asset whose economic benefits are consumed based on usa
A) Straight-line B) Reducing balance C) Units of production D) Sum of digits

15 A company has a building with a carrying amount of $1,000,000. Due to market conditions, its recoverable amount
A) $1,000,000 B) $900,000 C) $800,000 D) $700,000

16 A company capitalizes borrowing costs on a qualifying asset. Which of these periods is correct for capitalization?
A) Until the asset is ready for use B) Until the loan is repaid C) For the first year only D) Throughout the asset's life

17 An asset costs $300,000 with expected useful life of 5 years and residual value $20,000. Using reducing balance dep
A) $84,000 B) $90,000 C) $56,000 D) $78,000

18 What is the treatment of gain on revaluation of PPE?

A) Always to profit or loss
B) To other comprehensive income and revaluation surplus
C) Directly to retained earnings
D) To capital reserve

19 A machine is purchased with payment terms of 2 years. The cash price is $500,000, while the total payment will be
A) $550,000 B) $500,000 C) $525,000 D) $600,000

Which cost can be included in self-constructed asset?

A) Abnormal waste of materials
B) General administrative overheads
C) Directly attributable labor costs
D) Storage costs of materials

20 In an exchange of assets, when should the cost of acquired asset be measured at carrying amount?
A) When fair value cannot be measured reliably B) When exchange has commercial substance C) When cash is part

21 How should depreciation be calculated if an asset is revalued?

A) Based on original cost B) Based on revalued amount C) No depreciation required after revaluation D) Choice of o

22 What happens to accumulated depreciation when an asset is revalued using the elimination method?
A) Remains unchanged B) Is eliminated against gross carrying amount C) Is proportionally restated D) Is added to co

23 Land has a carrying amount of $1,000,000. Market value falls to $800,000. The impairment loss should be:
 A) Charged to profit or loss B) Ignored as land is not depreciable C) Charged to revaluation reserve D) Capitalized as

24 When should components of an asset be depreciated separately?

A) Never B) When cost is significant relative to total asset C) Only for buildings D) Only if required by tax authorities

25 A machine's carrying amount is $400,000. After revaluation, carrying amount increases to $450,000. The journal en
A) Dr PPE $50,000, Cr Profit & Loss $50,000 B) Dr PPE $50,000, Cr Other Comprehensive Income $50,000 C) Dr PPE

26 Which event automatically triggers impairment testing?

A) Change in depreciation method B) Significant fall in market interest rates C) Significant decline in market value D

27 An asset costing $200,000 has accumulated depreciation of $80,000. If sold for $150,000, what is the profit/loss on
A) $30,000 profit B) $50,000 loss C) $70,000 loss D) $30,000 loss

28 When can borrowing costs capitalization begin?

A) When expenditure on asset is incurred B) When borrowing occurs C) When construction begins D) When all activ

29 Which is NOT an indicator of impairment?

A) Physical damage B) Temporary increase in market interest rates C) Asset's market value declined significantly D)

30 An asset's cost is $600,000, accumulated depreciation $200,000, and impairment loss $50,000. What's the carrying
A) $400,000 B) $350,000 C) $250,000 D) $450,000

31 What happens to depreciation charge when residual value increases?

A) Increases B) Decreases C) Remains the same D) Becomes zero

32 A revalued asset with carrying amount $300,000 is sold for $280,000. The revaluation surplus is $40,000. The impac
A) $20,000 loss B) $60,000 loss C) $20,000 profit D) No impact

33 When should PPE be derecognized?

A) When fully depreciated B) When temporarily idle C) On disposal or when no future benefits expected D) When im

34 An asset costs $800,000 with useful life 4 years. After 2 years, useful life is revised to 3 more years. Annual deprecia
A) $200,000 B) $133,333 C) $266,667 D) $400,000

35 An entity capitalizes $100,000 of general borrowing costs on a qualifying asset. The weighted average borrowing ra
A) $1,250,000 B) $800,000 C) $1,000,000 D) $1,500,000

36 A building's cost is $2,000,000, accumulated depreciation $400,000. It's revalued to $1,800,000. Using the proportio
A) $360,000 B) $400,000 C) $0 D) $200,000

37 Which cost should be included in self-constructed PPE?

A) Marketing costs B) Training costs C) Directly attributable labor D) General administrative expenses

38 When can an entity stop capitalizing borrowing costs?

A) When construction is complete B) When substantially all activities are complete C) When the loan is repaid D) W

39 An asset's carrying amount is $500,000. Value in use is $450,000, disposal costs are $20,000, and market value is $4
 A) $450,000 B) $440,000 C) $460,000 D) $500,000

40 A machine costs $900,000 with 6 years useful life. After 4 years, enhancement costs of $200,000 extend life by 4 ye
A) $150,000 B) $275,000 C) $100,000 D) $125,000

41 What is the correct sequence for impairment testing of assets?

A) Individual asset, CGU, corporate assets B) CGU, individual asset, corporate assets C) Corporate assets, individual

42 A revaluation decrease of $60,000 occurs on an asset with a revaluation surplus of $40,000. The amount charged to
A) $60,000 B) $40,000 C) $20,000 D) $0

43 Which is NOT a qualifying asset for borrowing costs?

A) Manufacturing plant under construction B) Investment property under development C) Inventory produced over

44 An asset purchase price is $500,000, import duties $50,000, recoverable taxes $40,000, site preparation $30,000. T
A) $580,000 B) $620,000 C) $540,000 D) $500,000

45 What happens to depreciation when an asset is classified as held for sale?

A) Continues normally B) Doubles C) Ceases D) Halves

46 A company changes from straight-line to reducing balance depreciation. This is:

A) Change in accounting policy B) Change in accounting estimate C) Prior period error D) Not permitted

47 PPE with cost $800,000, accumulated depreciation $300,000 is revalued to $600,000. Using elimination method, th
A) $100,000 surplus B) $200,000 deficit C) $100,000 deficit D) $200,000 surplus

48 Which cost is capitalized as part of asset cost?

A) Advertising costs B) Staff training costs C) Testing costs D) Regular maintenance costs

49 An impairment loss of $50,000 was recognized when recoverable amount was $200,000. Recoverable amount is no
A) $50,000 B) $30,000 C) $20,000 D) $0
 l life is 5 years with a residual value of $50,000.

ttributable to the acquisition

ciation at the time of revaluation is $200,000. Using the gross method, what is the new accumulated depreciation?

ll is $120,000, and its value in use is $130,000. What is the impairment loss?

X3, it was revalued to $280,000.

harge for 20X4?

mpairment loss of $50,000. What is its new carrying amount?

for a new machine requiring additional cash payment of $20,000.

ed to $300,000. Using the gross method, what is the revaluation surplus?

ts are consumed based on usage?

tions, its recoverable amount falls to $800,000. After recording the impairment, what is the new carrying amount?

s correct for capitalization?

D) Throughout the asset's life

00. Using reducing balance depreciation at 30%, what is year 1 depreciation?

hile the total payment will be $550,000. What amount should be capitalized?

ying amount?
ubstance C) When cash is part of exchange D) When assets are similar in nature

fter revaluation D) Choice of original cost or revalued amount

nation method?
nally restated D) Is added to cost

ment loss should be:

ation reserve D) Capitalized as part of cost

y if required by tax authorities

es to $450,000. The journal entry will include:

ve Income $50,000 C) Dr PPE $450,000, Cr Cash $450,000 D) Dr PPE $50,000, Cr Retained Earnings $50,000

cant decline in market value D) Regular maintenance

000, what is the profit/loss on disposal?

uction begins D) When all activities necessary to prepare asset for use begin

value declined significantly D) Evidence of obsolescence

$50,000. What's the carrying amount?

surplus is $40,000. The impact on profit or loss is:

benefits expected D) When impaired

3 more years. Annual depreciation will be:

eighted average borrowing rate is 8%. What amount of expenditure on the qualifying asset must have been outstanding for the year?

1,800,000. Using the proportional method, what's the new accumulated depreciation?

rative expenses

When the loan is repaid D) When the asset generates revenue

20,000, and market value is $460,000. The recoverable amount is:

of $200,000 extend life by 4 years. Annual depreciation after enhancement is:

) Corporate assets, individual asset, CGU D) Individual asset, corporate assets, CGU

0,000. The amount charged to profit or loss is:

nt C) Inventory produced over short period D) Power plant being constructed

0, site preparation $30,000. The cost of the asset is:

D) Not permitted

Using elimination method, the revaluation surplus/deficit is:

00. Recoverable amount is now $230,000. The reversal amount is:

outstanding for the year?
 1 Development costs can be capitalized when:
A) All research is complete B) Technical feasibility is demonstrated C) Market research is positive D) Management a

2 Which is NOT an internally generated intangible asset?

A) Patents B) Brands C) Purchased software D) Customer lists

3 Goodwill arising on acquisition should be:

A) Amortized over its useful life B) Tested annually for impairment C) Written off immediately to reserves D) Revalu

4 Research costs must be:

A) Capitalized always B) Expensed as incurred C) Capitalized if future benefits are probable D) Added to goodwill

5 An intangible asset has an indefinite useful life when:

A) Management can't estimate the life B) No foreseeable limit to period of cash flows C) It's internally generated D)

6 Which cost can be capitalized for internally generated software?

A) Training staff to use the software B) Selling and administrative overheads C) Programming and coding costs D) M

7 A company spent $300,000 on research and $500,000 on development. Development criteria were met when $200
A) $800,000 B) $500,000 C) $300,000 D) $200,000

8 When can an intangible asset be revalued?

A) Never B) Only if acquired in business combination C) Only if active market exists D) When management decides

9 The useful life of an intangible asset that arises from contractual rights should not exceed:
A) 20 years B) Period of contractual rights C) 5 years D) Economic life

10 Software development costs of $400,000 include:

Design $100,000
Coding $150,000
Training $50,000
Testing $100,000 Amount to capitalize is:

A) $400,000 B) $350,000 C) $250,000 D) $150,000

11 Amortization of intangible assets begins when:

A) Expenditure is incurred B) Asset is available for use C) Revenue is generated D) Next accounting period starts

12 A patent costing $200,000 has accumulated amortization $80,000. Fair value is $150,000.
If revaluation is allowed, surplus/deficit is: A) $30,000 surplus B) $50,000 deficit C) $70,000 surplus D) $80,000 defic

13 Website development costs should be:

A) Always expensed B) Always capitalized C) Capitalized during application development stage D) Added to goodwil

14 An acquired customer list has no specified legal life. Useful life should be:
A) Indefinite B) Based on expected customer retention C) Maximum 5 years D) Same as goodwill
15 Which is NOT a criterion for development cost capitalization?
A) Technical feasibility B) Intention to complete C) Market research complete D) Adequate resources available

16 Subsequent expenditure on intangible assets should be:

A) Always capitalized B) Always expensed C) Capitalized if increases economic benefits D) Added to goodwill

17 For an intangible asset with finite life, amortization method should reflect:
A) Straight-line only B) Pattern of economic benefits consumption C) Revenue generated D) Industry standard

18 An impairment loss on revalued intangible asset should be:

A) Always charged to profit or loss B) First charged against revaluation surplus C) Ignored if asset has indefinite life D

19 Brands acquired in business combination are:

A) Not recognized B) Recognized at fair value C) Added to goodwill D) Expensed immediately

20 A company spends $300,000 on developing new product: Research phase: $100,000 Development (meets criteria):
A) $300,000 B) $200,000 C) $100,000 D) $0

21 In-process research and development acquired in business combination:

A) Must be expensed B) Must be recognized separately C) Added to goodwill D) Choice of recognition

22 Amortization method and period for intangible asset should be reviewed:

A) Only when impairment occurs B) At least at each year end C) Only when asset is revalued D) Every 5 years

23 An intangible asset's residual value is presumed to be zero unless:

A) Asset has indefinite life B) Third party commitment exists C) Management estimates value D) Asset is revalued

24 Which expenditure on intangible asset after purchase can be capitalized?

A) Marketing costs B) Staff training C) Enhancement increasing benefits D) Maintenance costs

25 A company acquires software license for $200,000. Implementation costs are: Installation: $30,000 Training: $20,00
A) $265,000 B) $245,000 C) $230,000 D) $200,000

26 Patent development costs include: Legal fees: $50,000 Research costs: $100,000 Development (post-feasibility): $1
A) $320,000 B) $170,000 C) $220,000 D) $150,000

27 An intangible asset is tested for impairment when:

A) Only at year end B) Only when revalued C) When indicators exist D) Every six months

28 Internally generated goodwill should be:

A) Capitalized B) Not recognized C) Added to acquired goodwill D) Amortized over 5 years

29 Which phase of website development should be expensed?

A) Planning B) Application development C) Graphics development D) Infrastructure development

30 A development project meets capitalization criteria after spending $300,000. Total cost is $500,000. Amount to cap
A) $500,000 B) $300,000 C) $200,000 D) $0
31 Useful life of an intangible asset is indefinite when:
A) Cannot be estimated reliably B) Exceeds 20 years C) No foreseeable limit to cash flows D) Management decides

32 Exchange of intangible assets is measured at fair value unless:

A) Assets are similar B) Exchange lacks commercial substance C) Cash is involved D) Assets are patents

33 Which cost is NOT capitalized for internal software development?

A) Direct labor B) Training costs C) Testing costs D) Software tools

34 Amortization of revalued intangible asset is based on:

A) Original cost B) Revalued amount C) Market value D) Choice of above

35 An acquired trademark has legal life of 10 years, economic life of 15 years. Amortization period should be:
A) 10 years B) 15 years C) 20 years D) Indefinite

36 Development costs previously expensed should be:

A) Capitalized retrospectively B) Not capitalized C) Added to current development costs D) Treated as prior period e

37 Intangible asset with finite life should be tested for impairment:

A) Annually only B) When indicators exist C) Every six months D) Never

38 Which is recognized separately from goodwill?

A) Assembled workforce B) Acquired patents C) Synergies D) Market share

39 Cost of defensive intangible asset should be:

A) Expensed immediately B) Amortized over expected period of benefit C) Not amortized D) Added to goodwill

40 Revaluation decrease of intangible asset should be:

A) Always to profit or loss B) First against revaluation surplus C) To reserves directly D) Capitalized

41 Annual impairment test is required for:

A) All intangible assets B) Assets with indefinite life C) Only goodwill D) Only patents

42 A patent's carrying amount is $200,000. Recoverable amount falls to $150,000. After impairment, carrying amount
A) $200,000 B) $175,000 C) $150,000 D) $100,000

43 Subsequent expenditure on brands should be:

A) Always capitalized B) Always expensed C) Capitalized if separately identifiable D) Added to goodwill

44 Change in intangible asset's expected pattern of benefits is:

A) Change in accounting policy B) Change in estimate C) Prior period error D) Not permitted

45 Website operating costs should be:

A) Capitalized B) Expensed as incurred C) Amortized D) Added to development costs

46 Research and development facility acquired in business combination should be:

A) Expensed B) Recognized at fair value C) Added to goodwill D) Not recognized
47 Cryptocurrency development costs should be:
A) Always capitalized B) Always expensed C) Capitalized if criteria met D) Added to financial assets

48 An intangible asset's recoverable amount is higher than carrying amount. Entity should:
A) Recognize gain B) Not recognize gain C) Revalue asset D) Reverse prior impairment

49 Customer lists developed internally should be

: A) Capitalized at cost B) Not recognized C) Recognized at fair value D) Added to goodwill

50 Blockchain platform development includes: Planning: $100,000 Development: $300,000 Testing: $50,000 Marketing
A) $500,000 B) $450,000 C) $350,000 D) $400,000
h is positive D) Management approves the budget

mediately to reserves D) Revalued annually

bable D) Added to goodwill

C) It's internally generated D) It's more than 20 years

amming and coding costs D) Marketing costs

t criteria were met when $200,000 had been spent. The amount to capitalize is:

When management decides

xt accounting period starts

0,000 surplus D) $80,000 deficit

ent stage D) Added to goodwill

quate resources available

s D) Added to goodwill

ted D) Industry standard

red if asset has indefinite life D) Capitalized as part of cost

Development (meets criteria): $200,000 Amount to recognize is:

e of recognition

valued D) Every 5 years

es value D) Asset is revalued

ation: $30,000 Training: $20,000 Testing: $15,000 Cost to capitalize is:

elopment (post-feasibility): $150,000 Registration: $20,000 Amount to capitalize is:

evelopment

st is $500,000. Amount to capitalize is:

ows D) Management decides

ssets are patents

on period should be:

sts D) Treated as prior period error

zed D) Added to goodwill

) Capitalized

impairment, carrying amount is:

dded to goodwill
nancial assets

00 Testing: $50,000 Marketing: $50,000 Amount to capitalize if criteria met is:

 1 Basic EPS is calculated by dividing:
A) Net profit by total shares B) Profit after tax by weighted average ordinary shares C) EBIT by number of shares D)

2 Which shares are NOT included in basic EPS calculation?

A) Issued shares B) Potential ordinary shares C) Bonus shares D) Rights issue shares

3 A company has profit of $500,000 and 200,000 shares. Basic EPS is:
A) $2.50 B) $0.40 C) $2.00 D) $3.00

4 Diluted EPS considers:

A) Only convertible bonds B) All potential ordinary shares C) Only share options D) Only preference shares

5 Time weighting of shares is required when:

A) Bonus issue occurs B) Rights issue occurs C) Shares issued for cash D) Stock split occurs

6 Company issues 100,000 shares on July 1. Year-end is December 31. Weighted average is:
A) 100,000 B) 50,000 C) 75,000 D) 25,000

7 Which requires retrospective adjustment?

A) Share options exercised B) Bonus issue C) Rights issue at fair value D) New share issue for cash

8 Convertible bonds are dilutive when:

A) Conversion price > market price B) Interest saving per share > basic EPS C) Market price > conversion price D) Alw

9 For rights issue, theoretical ex-rights price uses:

A) Market price only B) Exercise price only C) Both market and exercise price D) Par value

10 Net profit $1,000,000, 400,000 shares, 100,000 potential shares. Basic EPS is:
A) $2.50 B) $2.00 C) $3.00 D) $1.67

11 Preference dividends are:

A) Added to profit for EPS B) Deducted from profit for EPS C) Ignored in EPS calculation D) Only used in diluted EPS

12 Share split affects:

A) Basic EPS B) Neither basic nor diluted EPS C) Only diluted EPS D) Requires new calculation

13 Options are dilutive when:

A) Exercise price > average market price B) Exercise price < average market price C) Always dilutive D) Never dilutive

14 Treasury shares should be:

A) Included in EPS calculation B) Excluded from EPS calculation C) Only in diluted EPS D) Weighted average basis

15 Convertible preference shares are:

A) Always potential ordinary shares B) Never potential ordinary shares C) Only if mandatory conversion D) Only if lis

16 Company has: Profit: $800,000 Shares: 300,000 Bonus issue: 1:3 Basic EPS is:
A) $2.67 B) $2.00 C) $3.00 D) $1.33
 17 For diluted EPS, convertible bond interest is:
A) Added back net of tax B) Deducted net of tax C) Ignored D) Added back gross

18 Anti-dilutive instruments are:

A) Included in diluted EPS B) Excluded from diluted EPS C) Only included if material D) Averaged with dilutive

19 Rights issue adjustment factor uses:

A) Fair value only B) Theoretical ex-rights only C) Fair value/theoretical ex-rights D) Market value only

20 Options calculation uses:

A) Exercise price B) Average market price C) Higher of exercise or market D) Lower of exercise or market

Ratio
21 Current ratio is calculated as:
A) Current assets/Current liabilities B) Quick assets/Current liabilities C) Cash/Current liabilities D) Working capital/C

22 Which is NOT included in quick ratio?

A) Cash B) Inventory C) Trade receivables D) Short-term investments

23 Return on Capital Employed (ROCE) is:

A) Net profit/Capital employed B) EBIT/Capital employed C) Gross profit/Capital employed D) Operating profit/Tota

24 Inventory days is calculated using:

A) Inventory/Cost of sales × 365 B) Inventory/Sales × 365 C) Average inventory/Cost of sales × 365 D) Inventory/Pur

25 Asset turnover ratio indicates:

A) Profitability B) Efficiency C) Liquidity D) Gearing

26 Debt to equity ratio includes:

A) Only long-term debt B) All interest-bearing debt C) Only bank loans D) Current liabilities

27 Interest cover is calculated as:

A) EBIT/Interest expense B) Net profit/Interest expense C) Gross profit/Interest expense D) Operating profit/Total d

28 Operating profit margin is:

A) Gross profit/Sales × 100 B) Operating profit/Sales × 100 C) Net profit/Sales × 100 D) EBIT/Total assets × 100

29 Receivables collection period uses:

A) Average receivables B) Year-end receivables C) Opening receivables D) Highest receivables

30 Calculate inventory turnover: Cost of sales $600,000 Average inventory $100,000

A) 6 times B) 5 times C) 7 times D) 8 times

31 Calculate ROE: Net profit $100,000 Equity $500,000

A) 20% B) 15% C) 25% D) 30%

32 Calculate current ratio: Current assets $200,000 Current liabilities $80,000

A) 2.5:1 B) 1.5:1 C) 3:1 D) 2:1
33 Capital gearing includes:
A) Only preference shares B) Only debentures C) All long-term debt plus preference shares D) All current liabilities

34 Quick ratio of 1.5 suggests:

A) Excessive liquidity B) Adequate liquidity C) Poor liquidity D) Cannot determine
 ) EBIT by number of shares D) Net profit by year-end shares

nly preference shares

sue for cash

price > conversion price D) Always dilutive

n D) Only used in diluted EPS

lways dilutive D) Never dilutive

D) Weighted average basis

datory conversion D) Only if listed

 ) Averaged with dilutive

arket value only

exercise or market

liabilities D) Working capital/Current liabilities

oyed D) Operating profit/Total assets

of sales × 365 D) Inventory/Purchases × 365

nse D) Operating profit/Total debt

D) EBIT/Total assets × 100

shares D) All current liabilities
 1 Control is presumed to exist when parent owns:
A) More than 50% voting rights B) Exactly 50% voting rights C) More than 40% voting rights D) More than 25% votin

2 Goodwill is calculated as:

A) Cost of investment - Net assets acquired B) Cost of investment - Fair value of net assets C) Fair value - Book value

3 For 80% subsidiary, NCI is measured at:

A) 20% of net assets B) 20% of fair value C) Either A or B (accounting policy choice) D) 80% of net assets

4 Intra-group transactions should be:

A) Partially eliminated B) Fully eliminated C) Eliminated proportionally D) Not eliminated

5 Acquisition costs should be:

A) Capitalized as part of investment B) Expensed in profit or loss C) Added to goodwill D) Deferred and amortized

6 Unrealized profit on downstream sales is eliminated against:

A) Parent's profit B) Subsidiary's profit C) Group profit D) NCI share

7 Post-acquisition reserves represent:

A) All subsidiary's reserves B) Parent's share of subsidiary's post-acquisition profits C) NCI share of profits D) Pre-acq

8 Consolidated revenue includes:

A) Parent's revenue only B) Parent + subsidiary revenue C) Parent + subsidiary revenue - intra-group sales D) Propo

9 When parent owns 100%, NCI is:

A) Not recognized B) Measured at fair value C) Measured at book value D) Optional recognition

10 Step acquisition requires:

A) Fresh start accounting B) Remeasurement of previous holding C) Continuation of previous values D) No special tr

11 Contingent consideration is initially:

A) Ignored B) Recognized at fair value C) Added to goodwill D) Expensed

12 Intra-group dividends are:

A) Added to group profit B) Eliminated C) Shown separately D) Partially eliminated

13 Pre-acquisition dividends are:

A) Part of cost of investment B) Reduction in cost of investment C) Added to goodwill D) Treated as income

14 Provision for unrealized profit is:

A) Full amount B) Parent's share only C) NCI share only D) Not required

15 Fair value adjustments affect:

A) Parent only B) Subsidiary only C) Both parent and subsidiary D) Neither parent nor subsidiary

16 Calculate goodwill: Cost $500,000 Net assets fair value $400,000 80% acquired
A) $100,000 B) $180,000 C) $80,000 D) $150,000
17 NCI share of losses can:
A) Create negative NCI B) Be restricted to zero C) Be transferred to parent D) Be deferred

18 Bargain purchase results in:

A) Negative goodwill B) Gain in profit or loss C) Reduction in assets D) Adjustment to reserves

19 Investment in subsidiary is:

A) Added to group assets B) Eliminated against net assets C) Shown separately D) Partially eliminated

20 Mid-year acquisition requires:

A) Full year consolidation B) Time-apportioned consolidation C) No consolidation D) Proportionate consolidation

21 Goodwill impairment affects:

A) Parent only B) Group accounts only C) Subsidiary only D) Both individual and group accounts

22 Share of profit of associate is:

A) Above operating profit B) Below operating profit C) In other comprehensive income D) In reserves

23 Calculate NCI at acquisition: Net assets $300,000 Fair value $350,000 Parent owns 75% NCI at fair value option chos
A) $75,000 B) $87,500 C) $100,000 D) $262,500

24 Purchased goodwill is tested for impairment:

A) Annually B) Only if indicators exist C) Every six months D) Never

25 Loss of control results in:

A) Continued consolidation B) Derecognition of assets and liabilities C) Partial consolidation D) No change in treatm

26 Calculate consolidated retained earnings: Parent $200,000 Subsidiary $100,000 (80% owned) Post-acquisition
A) $280,000 B) $300,000 C) $250,000 D) $200,000

27 Company A acquires 80% of B for $600,000. B's net assets fair value is $500,000. B has intangible asset not recogniz
A) $150,000 B) $110,000 C) $140,000 D) $100,000
rights D) More than 25% voting rights

ssets C) Fair value - Book value D) Cost - Book value of shares

80% of net assets

D) Deferred and amortized

NCI share of profits D) Pre-acquisition reserves

ue - intra-group sales D) Proportionate revenue

revious values D) No special treatment

D) Treated as income
tially eliminated

roportionate consolidation

e D) In reserves

% NCI at fair value option chosen

dation D) No change in treatment

owned) Post-acquisition

s intangible asset not recognized. Calculate goodwill if intangible valued at $50,000:

1 Consolidation of financial position

Goodwill W3 XXX
Asset (P+S) XXX

Total asset XXX

Equity Capital ( parents only) XXX

Retain ear W5 XXX
Other com W5 XXX
Non controW4 XXX

Total Equity XXX

Liabiltiies ( P+S) XXX

Need to follow step:

- Eliminate carrying amount of parent investment in subsidiary which will be replaced by goodwill)
- Add together assets liabilities of parent and subsidiary in full
- Include only parent balance of equity and share premium\
- Set up standard working 2-5 to calculate goodwill, NCI, group retain earning

W2 Net asset of each subsidiary

At acqusition At reporting date
Equity capital X X
Share premium X X
Other component of equity X X
Retain earning X X
Goodwill in account of the sub (X) (X)
Fair value adjustment X X
Post acqusition depreciation/ amoritsation on FVA (X)
PURP if the sub is the seller (X)
X X
To W3

PURP provision for unrealised profit

Fair value of subsidiary net asset at acquistion date are use in calculate goodwill
The movement in the subsidiary net asset since acquistion is used to calculate NCI and group reserve

W3 Good will

Fair value of purchase consideration X

NCI at acquistion ** X
Less: Fair value of identifable net asset at (X)
 Goodwill at acquisition X
Less: Impairment to date (X)
Goodwill to conlidated SFP X

** IF full goodwill method adopted, NCI value =FV of NCI at date of acquisiton, This will normally given in question
** IF proportionate goodwill method adopted, NCI value = NCI% of the fair value of the subsidiary net asset at acqu

W4 Non-controlling interest

NCI at acquisition W3 X
NCI % of post acquistion movement in net X
Less: NCI % of goodwill impairment (fair v (X)
NCI to consolidated SFP X

W5 Group reserve retain earning

Parent retain earning X

For each subsidiary: Group share of post acquistion r X
Add: gain on bargain purchase (W3) X
Less: Goodwill impairment** (W3) (X)
Less: PURP if the parent was the seller (X)
Retained earnings to consolidated SFP X

** IF NCI was valued at fair value at the acquistion date, then only the parent share of the goodwill
impairment is deducted from retain earning

Other component of equity

Parent other component of equity X

For each subsidiary: group share of post acquistion other compo X
X

3- Associates IAS 28 Investment in Associated and Joint Ventures

The associate is defined as an entitiy over which the investor have significant influence and which is neither a subsi
Significant influence is the power to participate in, but not control, the financial and opearting policy decision of an
Associate holding between 20% and 50% of the voting power
Or
- Repesentation on the board of director
- Ability to influence policy making
- Significant levels of transactions between the entities and the investee
- Management personnel being shared between the entity and investee
- provision of important techical information

Accounting for associated

Statement of financial position
IAS 28 require that carrying amount of the associate is determined as follow:

Cost X/(X)
P% of post acquistion reserve (X)
Impairment loss (X)
P% of unrealised profit if P is the(X)
P% of excess depreciation on F (X)

Investment in associate X

- Investment in associate is shown in non- current asset of consolidate statement of financial position

Statement of profit or loss

For an associate, single line item is present in statement of profit or loss below opeating profit

P% of associate profit after tax X

Less: current year impairment loss (X)
Less: P% of unrealised profit if associate is (X)
Less: P% of excess depreciation on fair va (X)

Share of profit of associate X

"- Dividence received from associate must be remove from consolidated profit or loss
"- Transaction and balance between P and A are not eliminate from FS as A is not part of the group
"= The group share of any unrealised profit arising on transaction between P and A must be eliminate

If associate is the seller: If the associate is the purchaser

Dr. Share of associate profit (P/L)/ retain e Dr. Cost of sale (P/L)/ retain earning (SFP)
Cr. Inventory (SFP) Cr. Investment in associate (SFP)

When investor contribute asset in exchange for equity interest in associate, investor recognized portion of gain or
on disposal attributable in the associate ( if investor own 40% of associate, it recognized 60% of the gain or loss)

Disclosure
- Reporting date of between P and A should be the same, if not, then the difference should less than 3 month
- Accounting policy should be the same between P and A
- P should disclose its share of associate contingencies

Example Consolidation of financial position

Borough High Street

Asset
PPE 100,000 80,000 60,000
Investment 121,000 - -
Inventory 22,000 30,000 15,000
Receivable 70,000 10,000 2,000
Cash 47,000 25,000 3,000
360,000 145,000 80,000

Equity and liabilities

Capital 100,000 75,000 35,000
Retain earning 200,000 50,000 40,000
Other component of 10,000 5,000 -
Liabilities 50,000 15,000 5,000
360,000 145,000 80,000

On 1 July, Borough bought 45,000 share in High for 100,000. At that date, high have retain earning
of 30,000 USD and no other component of equity. High net asset had fair value of 120,000 USD and fair value
of NCI was 55,000 USD. NCI is value at FV.

The excess of fair value of high net asset over their carrying amount at the acquistion date relate to PPE
This had a remaining estimate useful life of 5 year at aquistion date. Goodwill has been subject to an impairment 7

Borough also purchase share 10,500 share in street for 21,000 USD. At acquisition date, the retain earning is 25,00
During the year Borough sold good to high for 10,000 USD at a margin 50%. By reporting date, high only sold 80% o
Included in receivable of Borough and the liabilities of High are intragroup balance of 5,000 USD

On 5 July Boruogh received notification that employee cliaming legal fee, and lawyer advice that 60% of chance wi
and need to pay 30,000 USD

Prepare consolidate financial statement

d by goodwill)

nd group reserve
will normally given in question
he subsidiary net asset at acquistion (W2)

of the goodwill

ce and which is neither a subsidiary nor join venture

opearting policy decision of an entity
financial position

t of the group
must be eliminate

recognized portion of gain or loss

zed 60% of the gain or loss)

should less than 3 month

retain earning
0,000 USD and fair value

n date relate to PPE

en subject to an impairment 7,000 USD

te, the retain earning is 25,000 USD

ting date, high only sold 80% of the good
5,000 USD

advice that 60% of chance will lose the case

2. Consolidatedd profit or loss

Step 1 Group structure control normally presumed exist of one company owns more than half of voting capital

Step2 Pro forma

P+S Revenues X
P+S Cost of sale (X)
Gross profit X
P+S Operating cost (X)
Profit from opeation X
P+S Investment income X
P+S Financial cost (X)
Profit before tax X
P+S Income tax (X)
Profit for the period X
P+S Other comprehensive income X
Total comprehensive income X

Profit attributable to
Equity holder of the parent (bal.fig) X
Non-controlling interest (step4) X

Profit for the period X

Total comprehensive income attribution to

Equity holder of parent ( bal.fig) X
Non-current interest (STEP4) X
Total comprehensive income attribution to X

Step3 Complete the pro forma

- If the subsidiary have been aquired mid year, make sure that to prorate the result of the subsidairy so that post acquision in
expense are consolidate
- Eliminate intra group expense and income, unrealized profit on intra group transaction, and divididence received from subsi

Step 4 Calculate profit attribution to non controlling interest

Profit fir year end must be split between group and non-controlling interest
Profit TCI
Profit of the subsidiary for the year X X
PURP ( IF S is the seller) (X) (X)
Excess depreciation (X) (X)
Goodwill impairment ( under FV model only(X) (X)
X NCI% X X
 Profit attributed to NCI X X

Normally NCI will be much higher if measured using fair value method rather than proportion of net asset method.
This is because goodwill and equity are increase by goodwill attributable to NCI
AS a result, the group may look more asset rich to potential investor.
Using fair value will increase goodwill on statement of financial position, and so goodwill impairment charge to profit or loss w
This may lead to lower reported profit in long term

- IF the intention to acquire subsidiary for re-sale purpose. It should not be consolidate into the group FS and it should be valu
alf of voting capital

dairy so that post acquision income

vididence received from subsidiary

f net asset method.

ment charge to profit or loss will be greater also

group FS and it should be value at FV less cost to sell