On what basis may a subsidiary be excluded from consolidation?

When negative goodwill arises IFRS 3 Business combinations requires that the amounts involved in computing goodwill should first be reassessed.

When the amount of the negative goodwill has been confirmed, how should it be accounted for?

Which TWO of the following statements are correct when preparing consolidated financial
statements?

IFRS 10 Consolidated financial statements provide a definition of control and identify three separate elements of control.
Which one of the following is not one of these elements of control?

Chemist Limited (CL) owns 100% of the share capital of the following companies. The directors are unsure of whether the investments should be consolidated.
In which of the following circumstances would the investment NOT be consolidated?

Ahmad Hassan Limited acquired 70% of the Rs. 100 million equity share capital of Asar Limited, its only subsidiary, for Rs. 200 million on 1 January 2019 when the retained earnings of Asar Limited were Rs. 156 million.
At 31 December 2019 retained earnings are as follows.
Rs. million
Ahmad Hassan Limited 275
Asar Limited 177,000
Ahmad Hassan Limited considers that goodwill on acquisition is impaired by 50%. Non-controlling
interest is measured at fair value, estimated at Rs. 82.8 million.
What are group retained earnings on 31 December 2019?

On 1 April 2010 Golden Limited acquired 75% of Silver Limited’s equity shares by means of a share
exchange and an additional amount payable on 1 April 2011 that was contingent upon the post-acquisition
performance of Silver Limited. At the date of acquisition, Golden Limited assessed the
fair value of this contingent consideration at Rs. 4.2 million but by 31 March 2011 it was clear that
the amount to be paid would be only Rs. 2.7 million.
How should Golden Limited account for this Rs. 1.5 million adjustments in its financial statements as
at 31 March 2011?

On 31 July 2018 Parveen Limited acquired 60% of the 18 million Rs. 10 ordinary shares of Sidra
Limited for a sum of Rs. 432 million. Sidra Limited had accumulated profits at 1 January 2018 of Rs.
360 million and during the year to 31 December 2018 made a profit of Rs. 108 million.
The fair value of the non-controlling interest at the date of acquisition is Rs. 200 million
What is the goodwill that should appear in the consolidated statement of financial position
at 31 December 2018?

Tanveer Limited acquired Tabeer Traders, an unincorporated entity, for Rs. 2.8 million. A fair value
exercise performed on Tabeer Traders’ net assets at the date of purchase showed:
Rs. 000
Property, plant and equipment 3,000
Identifiable intangible asset 500
Inventory 300
Trade receivables less payables 200
4,000
How would the purchase be reflected in the consolidated statement of financial position?

Which of the following definitions is not included within the definition of control per IFRS 10
Consolidated Financial Statements?

Sunshine Limited acquired 80% of the share capital of Sun Flower Limited on 1 January 2011. Part
of the purchase consideration was Rs. 200 million cash to be paid on 1 January 2014. The
applicable cost of capital is 10%.
What will the deferred consideration liability be at 31 December 2012?

Which TWO of the following situations are unlikely to represent control over an investee?

Which of the following is not a condition which must be met for the parent to be exempt from
producing consolidated financial statements?

Consolidated financial statements are presented on the basis that the companies within the group
are treated as if they are a single economic entity.
Which TWO of the following are requirements of preparing consolidated financial statements?

High Limited has a number of relationships with other companies. In which of the following
relationships is High Limited necessarily the parent?
(i) Fall Limited has 50,000 non-voting and 100,000 voting equity shares in issue with each
share receiving the same dividend. High Limited owns all of Fall Limited’s non-voting shares
and 40,000 of its voting shares.
(ii) Low Limited has 1 million equity shares in issue of which High Limited owns 40%. High
Limited also owns Rs. 800,000 out of Rs. 1 million 8% convertible debentures issued by
Low Limited. These debentures may be converted on the basis of 40 equity shares for each
Rs. 100 of debentures, or they may be redeemed in cash at the option of the holder.
(iii) High Limited owns 49% of the equity shares in Middle Limited and 52% of its nonredeemable
preference shares. As a result of these investments, High Limited receives
variable returns from Middle Limited and has the ability to affect these returns through its
power over Middle Limited.

On 1 March 2019, Qazi Limited acquired 70% of the share capital of Hijazi Limited at a cost of Rs.
387 million.
At that date, the fair value of the net assets of Hijazi Limited was Rs. 450 million. Transaction costs
incurred in making the acquisition were Rs. 0.045 million. Qazi Limited has decided to account for
the business combination using the full goodwill or fair value method, by attributing some goodwill
to the non-controlling interests in Hijazi Limited. It is estimated that at 1 March 2019 the fair value
of the non-controlling interests in Hijazi Limited was Rs. 153 million.
What was the total amount of goodwill recognised on the acquisition of Hijazi Limited by Qazi?
Limited?

Sound Limited obtained a 60% holding in the 10 million Rs. 10 shares of Cloud Limited on 1 January
2018, when the retained earnings of Cloud Limited were Rs. 850 million.
Consideration comprised of Rs. 250 million cash, Rs. 400 million payable on 1 January 2019 and one
share in Sound Limited for each two shares acquired. Sound Limited has a cost of capital of 8%
and the market value of its shares on 1 January 2018 was Rs. 23.
Sound Limited measures non-controlling interest at fair value. The fair value of the non-controlling
interest at 1 January 2018 was estimated to be Rs. 400 million.
What was the goodwill arising on the acquisition?

On 1 August 2017 Magnesium Limited purchased 1.8 million of the 2.4 million Rs. 10 equity shares
of Copper Limited. The acquisition was through a share exchange of two shares in Magnesium
Limited for every three shares in Copper Limited. The market price of a share in Magnesium Limited
at 1 August 2017 was Rs. 57.5.
Magnesium Limited will also pay in cash on 31 July 2019 (two years after acquisition) Rs. 24.2 per
acquired share of Copper Limited. Magnesium Limited’s cost of capital is 10% per annum.
What is the amount of the consideration attributable to Magnesium Limited for the acquisition of
Copper Limited?

Big Limited acquired 70% of Small Limited’s 10 million Rs. 10 ordinary shares for Rs. 800 million
when the retained earnings of Small Limited were Rs. 570 million and the balance in its revaluation
surplus was Rs. 150 million. The non-controlling interest in Small Limited was judged to have a fair
value of Rs. 220 million at the date of acquisition.
What was the goodwill arising on acquisition?

Faiqa Limited acquired 75% of the 120,000 Rs. 10 ordinary shares in Saiqa Limited on 1 January
2014. At that date, Saiqa Limited had accumulated profits of Rs. 700,000 and a share premium
account balance of Rs. 200,000. Faiqa Limited paid Rs. 1,680,000 for the shares in Saiqa Limited.
On 31 December 2017 Saiqa Limited had accumulated profits of Rs. 1,000,000 and Faiqa Limited
had accumulated profits of Rs. 1,600,000.
What are the consolidated accumulated profits as of 31 December 2017?