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Wiley IFRS: Practical Implementation Guide and Workbook
MULT1PL E·CHOICE QUESTIONS
1.
A joint venture is exempt from using the equity
method or proportionate consolidation in certain cir–
cumstances. Which of the following circumstances is
not
a legitimate reason for not using the equity
method or proportionate consolidation?
(a) Where the interest is held for sale under
IFRS 5.
(b) Where the exception in lAS 27 applies re–
garding an entity not being required to pre–
sent consolidated financial statements.
(c) Where the venturer is wholly owned, is not a
publicly traded entity and does not intend to
be, the ultimate parent produces consoli–
dated accounts, and the owners do not object
to the nonusage of the accounting methods.
(d) Where the joint venture ' s activities are dis-
similar from those of the parent.
Answer: (d)
2.
In the case of a jointly controll ed operation, a
venturer should account for its interest by
(a) Using the equity method or proportionate
consolidation.
(b) Recognizing the assets and liabilities, ex–
penses 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 joi ntly or
severally, and any income or expense relat–
ing to its interest in the joi nt venture.
(d) Using the purchase method of accounting.
Answer: (b)
3.
In the case of jo intly controlled assets, a venturer
should acco unt for its interest by
(a) Using the equity method or proportionate
consolidation.
(b) Recognizing the assets and liabilities, ex–
penses and income that relate to its interest
in the jo int venture.
(c) Showing its share of the assets that it jointly
controls, any liabilities incurred jointly or
severally, and any income or expense relat–
ing to its interest in the joint venture.
(d) Using the purchase method of accounti ng.
Answer: (c)
4.
In the case of jointly controlled entities, a ven–
turer should account for its interest by
(a) Using the equity method or proportionate
consolidation.
(b) Recognizing the assets and liabilities, ex–
penses 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 joi ntly or
severally, and any income or expense relat–
ing 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 fol–
lowing 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 j oint
venture are dissimilar.
(d) Where the venturer does not exert signifi–
cant influence.
Answer: (b)
~.
Under proportionate conso lidation, the minority
mterest
10
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 statement s 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 ven–
turer?
(a) $2 million.
(b)
$800,000
(c) $1.2 million.
Cd) Zero.
Answer: (e)