ICAN Strategic Business Reporting 2023 past questions and answers

1. Delta is an associate because Mira owns less than half of the voting shares.
2. Delta is a joint arrangement because the other shareholders also have voting rights.
3. Delta is a financial asset because Mira does not own a majority of the shares.
4. Mira controls Delta and should consolidate it as a subsidiary.

Answer: D. Mira controls Delta and should consolidate it as a subsidiary.

Control depends on power over relevant activities, exposure to variable returns and the ability to use power to affect those returns; it is not determined solely by a 50% threshold. Given the dispersed holdings and Mira's practical ability to determine relevant decisions, the facts support de facto control.

1. Expense the acquisition-related fees as incurred and deduct the share issue costs from equity, subject to applicable requirements.
2. Add both costs to goodwill as part of the consideration transferred.
3. Recognise both costs in other comprehensive income at the acquisition date.
4. Capitalise both costs as intangible assets because they relate to obtaining control.

Answer: A. Expense the acquisition-related fees as incurred and deduct the share issue costs from equity, subject to applicable requirements.

IFRS 3 requires acquisition-related costs such as legal and due-diligence fees to be expensed as incurred, except costs of issuing debt or equity instruments. Share issue costs are accounted for under the relevant financial instrument requirements, generally as a deduction from equity; neither amount is added to goodwill.

1. A joint venture, because a separate legal vehicle always creates rights to net assets.
2. A subsidiary of the party that supplies the larger share of the inputs.
3. A joint operation, because the parties have rights to assets and obligations for liabilities.
4. An associate, because the parties share decision-making.

Answer: C. A joint operation, because the parties have rights to assets and obligations for liabilities.

Classification under IFRS 11 reflects the parties' rights and obligations, not only the legal form of the vehicle. Direct rights to assets and obligations for liabilities indicate a joint operation; a joint venture instead gives rights to the arrangement's net assets.

1. Restate monetary assets and liabilities using the general price index, but leave non-monetary items unchanged.
2. Restate non-monetary items and equity using a general price index, and recognise the net monetary gain or loss in profit or loss.
3. Translate every statement of financial position item at the closing exchange rate and recognise the difference in equity.
4. Continue using historical cost amounts and disclose inflation only in the notes.

Answer: B. Restate non-monetary items and equity using a general price index, and recognise the net monetary gain or loss in profit or loss.

IAS 29 restates financial statements into the measuring unit current at the reporting date, using a general price index for relevant non-monetary items and equity. Monetary items are not themselves restated, and the net monetary gain or loss is included in profit or loss.

1. At fair value through profit or loss, because all bonds are derivatives.
2. At fair value through other comprehensive income, because it has contractual cash flows.
3. As an equity instrument at fair value through other comprehensive income.
4. At amortised cost.

Answer: D. At amortised cost.

A debt asset is measured at amortised cost when it is held in a collect-contractual-cash-flows business model and its cash flows meet the SPPI condition. Fair value through OCI generally applies when the business model is both collecting and selling, subject to the same cash-flow test.