Question bank — IFRS 10 — Consolidated Financial Statements
93 questions in FR/EN/ES, scored by the real scoring engine.
The requirement to present consolidated statements2 questions
- A company becomes a parent, and so must present consolidated financial statements, as soon as it holds a percentage of capital set in advance, without any need to assess control of the investee.True / falseL1
- Cèdre SA holds securities in several entities with which it has very different kinds of relationship (equity, loans, management contracts). What determines whether Cèdre SA is a parent?Single choiceL1
The exemption of a parent in a wider group2 questions
- Which conditions must be met for a parent to be exempt from presenting consolidated financial statements? More than one answer is possible.Multiple choiceL2Variant
- Opale SA is 90% owned by Groupe Nacre; the other shareholders have been told that Opale will not present consolidated financial statements and have not objected. Opale's securities are not traded in a public market, Opale has filed nothing with a regulator for a public issue, and Groupe Nacre publishes consolidated financial statements that comply with IFRS and are available for public use. Opale controls several subsidiaries. What is concluded?Single choiceL2Variant
Control: three cumulative elements4 questions
- For an investor to control an investee, three elements must all be present: power over the investee, exposure or rights to variable returns, and the ability to use its power to affect the amount of those returns.True / falseL1Variant
- A colleague writes: "Cèdre SA receives dividends that vary with the profit of Lierre SA; it is therefore exposed to variable returns and controls Lierre SA." What is wrong with this reasoning?Single choiceL2
- Érable SA holds existing rights that give it the current ability to direct the relevant activities of Saule SA (case assumption). It receives dividends whose amount varies with Saule's profit, and it can use its rights to decide the level of those dividends (case data). What is concluded?Single choiceL2Variant
- Borealis SA has power over Zeta SAS (case data). However, it is not exposed to, and has no rights to, any variable returns from Zeta: it receives no remuneration or dividend and has no other economic link with Zeta (case facts). Does Borealis control Zeta under IFRS 10?Single choiceL2
Continuous reassessment of control2 questions
- Delta SA controls Sigma SA. Sigma breaches a covenant with its bank, which makes exercisable certain rights of the bank that are designed to protect its interests as lender (case data). What must Delta SA do about its control of Sigma?Single choiceL2
- Orme SA controls Tilleul SA. Tilleul's shareholders amend its articles: budget decisions now require the agreement of two directors appointed by another shareholder. Write a short note stating whether Orme must reassess its control, distinguishing case facts, rule and professional judgement, and taking into account the pending question on amendments to a constitutional document.JudgmentL3
Power arises from existing rights3 questions
- The intention of management to steer the investee is enough to give the investor power, even where there are no existing rights.True / falseL1
- What does the power of an investor over an investee rest on?Single choiceL1
- Under a shareholders' agreement, Orme SA holds the currently exercisable right to appoint the majority of the directors of Hêtre SA, who decide the relevant activities. Frêne SA, a minority shareholder, steers the discussions of the meetings in practice thanks to the strong personality of its chief executive, without holding any particular right. Case convention: Orme's rights are exercisable in practice. Which of the two companies holds power over Hêtre?Single choiceL2
The relevant activities3 questions
- In the analysis of power, what is meant by the "relevant activities" of an investee?Single choiceL1
- Which statements about power and relevant activities are correct? More than one answer is possible.Multiple choiceL2
- The Zénith fund selects and sells investments, and entrusts its administration to Frêne SA for a fixed fee. Orme SA holds the current right to decide the selection and sale of the investments. Write a short note identifying Zénith's relevant activities and the party that has the ability to direct them, distinguishing case facts, rule and professional judgement.JudgmentL2
Substantive rights3 questions
- To confer power, a right must be substantive: its holder must have the practical ability to exercise it.True / falseL1
- Cèdre SA holds the right to approve Lierre SA's business plan. Under the agreement, this right can be exercised only after 18 months, whereas the decisions on Lierre's relevant activities are taken in the meantime (case data). What is concluded about this right?Single choiceL2
- Gamma SA holds the right to remove the directors of Delta SA, but exercising that right requires the agreement of many security holders who have no means of coordinating, and Gamma would derive no benefit from it (case data). Write a short note concluding on whether this right is substantive, distinguishing case facts, rule and professional judgement.JudgmentL2
Protective rights3 questions
- What is the function of a protective right held by an investor in an entity?Single choiceL1
- A colleague writes: "The protective rights of Sigma SA's bank do not give it power; the fact that a breach makes them exercisable therefore calls for no reassessment of control of Sigma." What is wrong with this reasoning?Single choiceL2
- Which statements about protective rights are correct? More than one answer is possible.Multiple choiceL2
Power without a majority of votes2 questions
- Cèdre SA holds 40% of the voting rights of Lierre SA. The remaining 60% is spread among a very large number of holders, none holding more than 1%, and these holders have never voted together at previous meetings (case data). What can be concluded about Cèdre's power?Single choiceL2
- Aube SA holds 35% of the voting rights of Brume SA. The balance belongs to about a hundred dispersed holders, the largest of which holds 4%. At the last three meetings, fewer than half of the voting rights were cast, and Aube had every resolution it put forward adopted (case data). Write a short note concluding on Aube's power, distinguishing case facts, rule and professional judgement.JudgmentL3
Potential voting rights2 questions
- Potential voting rights, such as options, warrants or convertible instruments, enter the assessment of power whether or not they are substantive.True / falseL2
- Cèdre SA holds 30% of the voting rights of Lierre SA and a call option over a further 25% of rights, exercisable at any time at a price close to fair value. Case assumption: the option is substantive. How does this option enter the assessment of Cèdre's power?Single choiceL3
Structured entities2 questions
Exposure to variable returns3 questions
- The variable returns of an investor in an entity are limited to the dividends the entity pays to it.True / falseL1
- Which statements about variable returns are correct? More than one answer is possible.Multiple choiceL1
- Saule SA holds 15% of the capital of Tilleul SA. It receives a dividend whose amount depends on Tilleul's profit, and it would suffer a loss on its holding if Tilleul recorded losses (case data). What can be said about Saule's returns in Tilleul?Single choiceL2
The link between power and returns3 questions
- In the analysis of control, what does the link between power and returns mean?Single choiceL1
- Alpha SA holds all the decision rights over the relevant activities of Delta SA. Delta's variable returns, positive and negative, go to Beta SA, a separate party with no power over Delta, and Alpha receives none of them (case data). Does Alpha control Delta?Single choiceL2
- Gamma SA holds the power to decide the relevant activities of Zeta SA and owns 12% of its equity; the balance of the returns goes to external investors. Write a short note concluding on whether there is a link between Gamma's power and its own returns, distinguishing case facts, rule and professional judgement.JudgmentL2
Principal or agent3 questions
- In the analysis of control, what characterises an agent as opposed to a principal?Single choiceL2
- GestionPlus SA manages the Horizon fund on behalf of and for the benefit of the fund's investors, exercising decision-making rights delegated to it. Case convention: GestionPlus acts as an agent. Must GestionPlus consolidate Horizon?Single choiceL3
- Among these four statements about a decision maker assessing whether it controls an entity, which one is wrong?Single choiceL3
The factors of the principal / agent analysis2 questions
- What does a decision maker take into account to determine whether it is an agent? More than one answer is possible.Multiple choiceL2
- Sextant SA manages the Aurore fund with wide decision-making authority. Investors hold removal rights whose exercise terms are under discussion, Sextant's remuneration is commensurate with the services provided, and Sextant holds a small interest in the fund (case data). Write a short note concluding on whether Sextant is an agent by weighing the factors together, distinguishing case facts, rule and professional judgement.JudgmentL3
Removal rights2 questions
- Substantive removal rights that a single party can exercise without cause can be enough to conclude that the decision maker is an agent.True / falseL2
- Sextant SA manages the Zénith fund. One investor, Orme SA, can remove Sextant at any time, without having to give a reason and without the agreement of any other party. Case assumption: this right is substantive. What is the effect of this right in the principal / agent analysis of Sextant?Single choiceL3
The decision maker's remuneration and exposure3 questions
- A colleague concludes: "The manager's exposure to the fund's returns is below the percentage set by the standard; it is therefore an agent." What is wrong with this reasoning?Single choiceL3
- Sextant SA manages a fund for a fee commensurate with the services provided, which includes only terms customary for such services. Sextant also holds a small interest in the fund (case data). What can be concluded?Single choiceL3
- Aurora Gestion exercises decision-making rights delegated to it over a fund. Its remuneration is commensurate with the services provided and the remuneration agreement includes only terms, conditions and amounts customarily present for similar services negotiated on an arm's length basis (case facts). What can be concluded under IFRS 10?Single choiceL3
Line-by-line combination and elimination of the investment3 questions
- In the consolidated financial statements, the carrying amount of the parent's investment in a subsidiary is eliminated against the parent's portion of the equity of that subsidiary.True / falseL1
- Orme SA owns 100% of Pin SA. Orme reports: cash 100,000 and shares in Pin 60,000. Pin reports: cash 25,000 and inventories 35,000, no debt, for equity of 60,000. Case convention: the carrying amount of the shares in Pin equals Pin's equity, and there is no goodwill and no intragroup transaction. What is the total of consolidated assets?Single choiceL2
- Explain in a few lines how a parent moves from the individual financial statements of the parent and its subsidiaries to the consolidated financial statements, stating what is combined, what is eliminated and why.JudgmentL3
Uniform accounting policies3 questions
- A subsidiary applies, for transactions similar to the group's, an accounting policy different from the parent's. How does the parent prepare its consolidated financial statements?Single choiceL2
- Pin SA, a subsidiary of Orme SA, measures certain assets under an accounting policy different from Orme's for similar assets (case data). Pin must keep its policy in its individual accounts, which its auditor has approved. Where is the restatement to harmonise policies made?Single choiceL3
- Tilleul SA, a subsidiary of the Orme group, applies for its fixed assets an accounting policy different from the group's for similar assets. Write a short note stating what treatment to apply in the consolidated statements, distinguishing case facts, rule and professional judgement.JudgmentL3
Intragroup transactions and unrealised profits3 questions
- Sud SA, a subsidiary of Nord SA, sold goods to Nord at a transfer price. At the reporting date, goods worth … at transfer price remain in Nord's inventory. Case convention: Sud's profit margin on these sales is … of the transfer price. Calculate the unrealised profit to be eliminated in the consolidated financial statements.CalculationL2Variant
- Ébène SA, a subsidiary of Orme SA, sold goods to Orme. At the reporting date, goods worth … at transfer price remain in Orme's inventory. Case convention: Ébène's profit margin is … of the transfer price, and the tax effect is ignored. Record the consolidation entry that eliminates the unrealised profit contained in that inventory.Journal entryL3Variant
- A group company sells goods to another group company, and some of the goods are still in inventory at the reporting date. What must be eliminated in the consolidated financial statements?Single choiceL2
The subsidiaries' reporting dates2 questions
- A subsidiary's reporting date differs from its parent's. What does the consolidation require?Single choiceL2
- Pin SA, a subsidiary of Orme SA, has a 30 November year end while Orme's is 31 December. Preparing additional information as of 31 December is impracticable for Pin (case data). Pin sold a major asset in December. Write a short note stating how Orme treats Pin's statements in the consolidation, distinguishing case facts, rule and professional judgement.JudgmentL3
Presentation of non-controlling interests3 questions
- In the consolidated statement of financial position, non-controlling interests are presented within equity, separately from the equity of the owners of the parent.True / falseL1Variant
- Where and how does a parent present non-controlling interests in the consolidated statement of financial position?Single choiceL1
- An intern presents the non-controlling interests of the Orme group among liabilities in the consolidated statement of financial position. What correction is needed?Single choiceL1Variant
Attribution of profit to owners and non-controlling interests3 questions
- Pin SA, a subsidiary of the Orme group, reports a profit of … for the year. Third parties hold … of Pin. Case convention: the percentages did not change during the year, and there are no intragroup eliminations or other comprehensive income. Calculate the share of profit attributed to the non-controlling interests.CalculationL2Variant
- Saule SA, a subsidiary of the Orme group, reports a profit of …. Third parties hold … of Saule. Case convention: the percentages did not change and the attribution is recorded in the consolidation work. Record the entry that attributes to the non-controlling interests their share of profit.Journal entryL3Variant
- A colleague attributes Pin SA's profit for the year to the non-controlling interests at the percentage third parties held at the acquisition date, i.e. 20%. Since a disposal by the parent before the start of the year, third parties hold 30% of Pin. What is the error?Single choiceL2
The deficit balance of non-controlling interests3 questions
- Tilleul SA, a subsidiary of the Orme group, records a loss of … for the year. Third parties hold … of Tilleul, and the carrying amount of their non-controlling interests is … at the start of the year. Case convention: no dividend and no other comprehensive income; a negative balance is shown with a minus sign. Calculate the closing balance of the non-controlling interests.CalculationL3
- Fresne SA, a subsidiary of the Orme group, records a loss of …. Third parties hold … of Fresne. Case convention: the attribution is recorded in the consolidation work, and the balance of the non-controlling interests may become a deficit. Record the entry that attributes to the non-controlling interests their share of the loss.Journal entryL3
- Pin SA records a loss of 100,000. Third parties hold 20% of Pin, and their non-controlling interests stand at 12,000 before this loss. Case convention: no dividend and no other comprehensive income. How do third parties bear their share of the loss?Single choiceL2
Cumulative preference shares held by non-controlling interests1 question
A change in ownership is an equity transaction3 questions
- Orme SA controls Pin SA; the carrying amount of the non-controlling interests in Pin is …. Orme acquires from third parties a fraction of … of those interests for … in cash and keeps control (case assumption). Calculate the difference recognised directly in equity, that is, the decrease in equity attributable to the owners of the parent.CalculationL3
- Saule SA, a subsidiary of Orme SA, has non-controlling interests with a carrying amount of …. Orme acquires … of those interests from third parties for … in cash, without losing control. Case convention: the entry is made at the consolidated level. Record the entry for this acquisition.Journal entryL3
- Orme SA holds 80% of Pin SA. It sells 10 percentage points to third parties (70% afterwards) for 90,000 in cash and keeps control. The amount by which the non-controlling interests increase is 70,000 (case data). How is the difference between 90,000 and 70,000 accounted for?Single choiceL3
The standard's silences on costs and goodwill1 question
Derecognition on loss of control3 questions
- Orme SA loses control of Pin SA. At the date control is lost, Pin's assets are carried in the consolidated accounts at …, goodwill included, and its liabilities at …. Calculate the carrying amount of Pin's net assets to be derecognised, before taking the non-controlling interests into account.CalculationL3
- Orme SA sells 70% of Pin SA and loses control; it keeps an interest. It receives … in cash, and the fair value of the retained interest is …. In the consolidated accounts, Pin's assets (excluding goodwill) stand at …, its goodwill at …, its liabilities at … and the non-controlling interests at …. Case convention: no other accumulated other comprehensive income. Record the loss-of-control entry.Journal entryL4
- What does a parent derecognise when it loses control of a subsidiary?Single choiceL3
The retained interest at fair value3 questions
- At the date of loss of control, the investment the parent retains in the former subsidiary is recognised at its fair value at that date.True / falseL3
- A disposal takes Érable SA's holding in Tilleul SA below the threshold of control: Érable receives … and keeps an interest whose fair value is …. In the consolidated accounts, Tilleul is represented by assets excluding goodwill of …, goodwill of …, liabilities of … and non-controlling interests of …. Case convention: no other accumulated other comprehensive income. Record the entry that reflects the loss of control and the retained investment.Journal entryL4
- Orme SA held 80% of Pin SA and sells 60 points of it: it loses control and keeps 20%. Orme's share of the carrying amount of Pin's net assets for that 20% is 240,000, and the fair value of the retained interest at the date of loss of control is 300,000 (case data). At what amount is the retained interest recognised?Single choiceL4
The gain or loss on loss of control3 questions
- Orme SA loses control of Pin SA and receives … in cash. The fair value of the retained interest is …, the carrying amount of the non-controlling interests is … and that of Pin's net assets derecognised, goodwill included, is …. Case convention: no other accumulated other comprehensive income to reclassify. Calculate the gain or loss (a negative result is shown with a minus sign).CalculationL3Variant
- The Orme group sells its majority stake in Hêtre SA for … in cash; the residual stake, without significant influence, has a fair value of …. In the consolidated balance sheet, Hêtre represents assets excluding goodwill of …, goodwill of …, liabilities of … and non-controlling interests of …. Case convention: no other accumulated other comprehensive income. Record the loss-of-control entry.Journal entryL4Variant
- For a loss of control, a colleague calculates: consideration received 700,000 − carrying amount of net assets derecognised 650,000 = gain of 50,000. The colleague ignores the fair value of the retained investment, 150,000, and the carrying amount of the non-controlling interests, 90,000. What is the error?Single choiceL4
Other comprehensive income on loss of control3 questions
- On loss of control of Pin SA, the accumulated other comprehensive income relating to Pin includes … of amounts reclassifiable to profit or loss (translation differences, case convention) and … of amounts whose gains and losses are not reclassified to profit or loss (case convention). Calculate the amount reclassified to profit or loss on loss of control.CalculationL4
- Orme SA loses control of Saule SA. The accumulated other comprehensive income relating to Saule, reclassifiable to profit or loss as on a direct disposal of its assets and liabilities, amounts to … (case convention). Record the reclassification entry.Journal entryL4
- On loss of control, the amounts of other comprehensive income relating to the subsidiary remain recognised in equity, with no particular treatment.True / falseL4
Multiple disposal arrangements2 questions
- Orme SA sells 40 points of its holding in Pin SA on 15 December, then a further 25 points on 15 March, under a single agreement signed on 15 December with the same buyer. Case assumption: the two sales are negotiated together, make economic sense only together, and the second depends on the first. What must Orme assess?Single choiceL4
- On 1 December, Orme SA sells 30 points of Brume SA to Alpha SA and signs the same day a put option over a further 30 points with Alpha, exercisable in June at a price agreed in advance; Alpha would not have bought the first tranche without the second (case data). Write a short note concluding on the treatment of these arrangements, distinguishing case facts, rule and professional judgement.JudgmentL4