ICAN Strategic Business Reporting 2024 past questions and answers

1. Aster cannot control Birch because it owns less than half of the voting shares.
2. Aster controls Birch and should consolidate it, because it has power, variable returns and the ability to use its power to affect those returns.
3. Aster must account for Birch as an associate solely because its holding is between 20% and 50%.
4. Aster may consolidate Birch only if it acquires at least 50% of the shares.

Answer: B. Aster controls Birch and should consolidate it, because it has power, variable returns and the ability to use its power to affect those returns.

IFRS 10 control requires power over relevant activities, exposure or rights to variable returns, and the ability to use power to affect returns; control can exist with less than a majority holding. The percentage thresholds in A, C and D do not override the facts about practical power.

1. A joint venture, because the arrangement has two investors.
2. A subsidiary, because each investor directs activities jointly.
3. An associate, because each investor has significant influence.
4. A joint operation, because the parties have rights to assets and obligations for liabilities.

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

IFRS 11 classifies an arrangement as a joint operation when the parties have rights to its assets and obligations for its liabilities. A joint venture instead gives the parties rights to the arrangement's net assets.

1. Initially record the sale at the transaction-date rate and translate the monetary receivable at the closing rate, recognizing the exchange difference in profit or loss.
2. Initially record and subsequently carry the receivable at the 1 November rate, recognizing no exchange difference until collection.
3. Translate the sale at the closing rate but leave the receivable at the transaction-date rate.
4. Recognize the exchange difference in other comprehensive income because the receivable is denominated in a foreign currency.

Answer: A. Initially record the sale at the transaction-date rate and translate the monetary receivable at the closing rate, recognizing the exchange difference in profit or loss.

The sale is initially translated at the spot rate on 1 November, while the monetary receivable is translated at the 31 December closing rate. The resulting exchange gain or loss is normally recognized in profit or loss; a foreign-currency denomination alone does not justify OCI.

1. Amortized cost, because the contractual cash flows meet the SPPI condition regardless of the business model.
2. Fair value through profit or loss, because every debt instrument held for sale fails SPPI.
3. Fair value through other comprehensive income, because the business model is achieved by both collecting cash flows and selling, and the cash flows meet SPPI.
4. Equity through other comprehensive income, because the bonds are held for investment.

Answer: C. Fair value through other comprehensive income, because the business model is achieved by both collecting cash flows and selling, and the cash flows meet SPPI.

A debt asset is measured at FVOCI when it meets SPPI and is held in a business model achieved by both collecting contractual cash flows and selling. Amortized cost requires a hold-to-collect business model, so A is not correct.

1. Level 3, because management must select a market price.
2. Level 1, because it is an unadjusted quoted price in an active market for an identical asset.
3. Level 2, because all quoted prices for financial assets are observable inputs other than Level 1.
4. Outside the hierarchy, because IFRS 13 applies only to non-financial assets.

Answer: B. Level 1, because it is an unadjusted quoted price in an active market for an identical asset.

An accessible, unadjusted quoted price in an active market for an identical asset is a Level 1 input. Level 2 and Level 3 cover other observable and unobservable inputs, respectively.