Professional Documents
Culture Documents
consolidation.
(b) Recognizing the assets and liabilities,
expenses
and income that relate to its interest
in the joint venture.
(c) Showing its share of the assets that it
jointly
controls, any liabilities incurred jointly or
severally, and any income or expense
relating
to its interest in the joint venture.
(d) Using the purchase method of
accounting.
Answer: (a)
5. The exemption from applying the equity
method
or proportionate consolidation is available in
the following
circumstances:
(a) Where severe long-term restrictions
impair
the ability to transfer funds to the investor.
(b) Where the interest is acquired with a
view to
resale within twelve months.
(c) Where the activities of the venturer and
joint
venture are dissimilar.
(d) Where the venturer does not exert
significant
influence.
Answer: (b)
6. Under proportionate consolidation, the
minority
interest in the venture is
(a) Shown as a deduction from the net
assets.
(b) Shown in the equity of the venturer.
(c) Shown as part of long-term liabilities of
the
venturer.
(d) Not included in the financial statements
of
the venturer.
Answer: (d)
7. A company has a 40% share in a joint
venture
and loans the venture $2 million. What figure
will be
shown for the loan in the balance sheet of
the venturer?
(a) $2 million.
(b) $800,000
(c) $1.2 million.
(d) Zero.
Answer: (c)
except:
(a) They have fixed or determinable
payments.
(b) The holder can recover substantially all
of
its investment (unless there has been credit
deterioration).
(c) They are not quoted in an active market.
(d) The holder has a demonstrated positive
intention and ability to hold them to
maturity.
Answer: (d)
6. What is the principle for recognition of a
financial
asset or a financial liability in IAS 39?
(a) A financial asset is recognized when, and
only when, it is probable that future
economic
benefits will flow to the entity and the
cost or value of the instrument can be
measured
reliably.
(b) A financial asset is recognized when, and
only when, the entity obtains control of the
instrument and has the ability to dispose of
the financial asset independent of the
actions
of others.
(c) A financial asset is recognized when, and
only when, the entity obtains the risks and
rewards of ownership of the financial asset
and has the ability to dispose the financial
asset.
(d) A financial asset is recognized when, and
only when, the entity becomes a party to the
contractual provisions of the instrument.
Answer: (d)
7. In which of the following circumstances is
derecognition
of a financial asset not appropriate?
(a) The contractual rights to the cash flows
of
the financial assets have expired.
(b) The financial asset has been transferred
and
substantially all the risks and rewards of
ownership of the transferred asset have also
been transferred.
(c) The financial asset has been transferred
and
the entity has retained substantially all the
risks and rewards of ownership of the
transferred
asset.
(d) The financial asset has been transferred
and
the entity has neither retained nor
transferred