Which of the following would cause a deferred tax balance to be included in the statement of financial position for an entity?
A. Expenses in the statement of profit or loss which are not allowable for tax creating a permanent difference.
B. The acquisition of land for which there is no tax depreciation.
C. The acquisition of plant and equipment a year ago where the tax depreciation rate is different to the accounting depreciation rate.
D. Impairment of goodwill that arose on the acquisition of a subsidiary entity.
JJ's current share price is $1.80, with a dividend of $0.20 a share just about to be paid.
Dividends have increased at an average annual growth rate of 4.5% and this is expected to continue into the future.
What is JJ's cost of equity?
A. 17.6%
B. 16.1%
C. 12.5%
D. 11.1%
RS has issued an instrument with a nominal value of $1 million, at a discount of 2.5%, and a coupon rate of 6%. The terms of the issue are that the instrument must either be redeemed at par, at the option of the holder, in three years' time, or alternatively converted into equity shares in RS.
The characteristics of this instrument taken as a whole indicates that it would be classifed as which of the following?
A. Compound instrument
B. Debt instrument
C. Equity instrument
D. Discounted instrument
XY acquired 75% of the equity shares of LM on 31 December 20X3. LM acquired 60% of the equity shares of JK on 31 December 20X4 for $950,000. XY measured the non controlling interest in JK at the date of acquisition using the proportionate share of the fair value of the net assets acquired. The fair value of JK's net assets was $850,000 at 31 December 20X4.
What is the value of goodwill that XY will include in its consolidated statement of financial position at 31 December 30X4 in respect of JK as a result of gaining indirect control?
A. $330,000
B. $202,500
C. $567,500
D. $440,000
ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings of CD were S3,550,000. CD has no other reserves. ST paid $5,600,000 for the shares in CD and the non controlling interest was measured at its fair value of S1,400,000 at acquisition.
At 1 January 20X3, the fair value of CD's net assets were equal to their carrying amount, with the exception of a building. This building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25 years on 1 January 20X3.
At 31 December 20X5, the retained earnings of ST and CD were $8,500,000 and $5,250,000 respectively.
What is the value of goodwill to be included in the consolidated statement of financial position of ST as at 31 December 20X5?
A. $450,000
B. $1,450,000
C. $950,000
D. $570,000
RS is a listed entity that has no subsidiaries although its Finance Director is also a director of TU, an unconnected entity.
It is preparing its financial statements to 30 September 20X6.
Which of the following substantial transactions must be disclosed in these financial statements in accordance with IAS 24 Related Party Disclosures?
A. Pension payments made on behalf of the Managing Director of RS.
B. Purchase of production materials from TU at a discounted price to the current market value.
C. Sale of finished goods to TU at normal selling price.
D. Performance related bonus payments made to the office staff for the year.
EFG is preparing its financial statements to 31 March 20X8. During the year ended 31 March 20X7, EFG purchased a piece of land for $1 million which is used as the staff car park. EFG has a policy of revaluing land, in accordance with International Accounting Standards, and at 31 March 20X8, accounted for a substantial increase in its value.
Revenue and operating profit has remained constant over the 2 years.
When comparing EFG's financial statements for the year ended 31 March 20X7 with those of 20X8, which THREE of the following would be expected?
A. Increase in profit before tax.
B. Increase in other comprehensive income.
C. Increase in return on capital employed.
D. Decrease in return on capital employed.
E. Increase in net asset turnover.
F. Decrease in net asset turnover.
Which of the following is a related party according to the definition of a related party in IAS24 Related Party Disclosures?
A. Major customer
B. Provider of finance
C. Managing Director
D. Major supplier
FGH plans to issue a large number of shares to the public via an IPO.
It is considering either an offer for sale at a fixed price or an offer for sale by tender.
Which of the following would be an advantage to FGH of using the offer for sale by tender compared to the fixed price offer?
A. The shares will be sold to different investors at differing values thus maximising the capital raised.
B. There would be more certainty over the issue price of the shares.
C. There is potential for reaching a higher share price thus maximising capital raised.
D. Tenders are more attractive to less sophisticated investors thus maximising potential investment.
DE acquired 10% of the equity shares of KL on 31 December 20X2.
A further 50% of the equity shares of KL were acquired by DE on 1 January 20X4.
Which THREE of the following would be part of the process for recording the second purchase of shares?
A. The goodwill calculated at 31 December 20X2 being revalued at 1 January 20X4.
B. The 10% investment being revalued to fair value at 1 January 20X4.
C. Assets, liabilities, income and expenses being fully consolidated from 1 January 20X4.
D. Goodwill being calculated at 1 January 20X4 for the first time.
E. Net assets at 1 January 20X4 being compared to the purchase consideration and a transfer to equity made.
F. A 50% non controlling interest will be shown in the consolidated financial statements.
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