18 - Group accounting - basic techniques.

IFRS 10 says that an investor has control over potential subsidiary when it has:

Power over the investee. | Exposure or rights to VARIABLE returns from involvement in the investee. | The ability to use power over the investee to AFFECT the investor's returns.

IFRS 3 states that the ... method is used to account for business combinations.

acquisition method

A BUSINESS COMBINATION is where an acquirer obtains...

control of a business.

Optional ... test can be used to assess whether an acquired set of assets is NOT a business.

concentration test

Concentration test concept.

The acquired assets are NOT A BUSINESS | if substantially all of the FV of the total assets acquired | is concentrated in a single identifiable asset | or group of similar identifiable assets.

If the concentration test is not met, a detailed assessment is required to assess if a business as being acquired. To meet the definition of a business...

inputs and substantive processes must have been acquired that can contribute to the creation of outputs. The outputs themselves are not required.

Inputs definition:

Economic resources | that can create outputs once processes are applied.

Processes definition:

Systems, standards or rules | that can create outputs when applied to inputs.

Outputs definition:

Goods, services and income.

The acquisition method has 5 requirements:

Identify the acquirer. | Identify the acquisition date. | Recognise the subsidiary net asset at FV, | Goodwill | and NCI.

The acquirer is the entity that has assumed control over entity. The acquirer is NORMALLY the company that transferred ... in the business combination.

cash, | or other assets | or shares

Acquisition method - identify the acquirer. Other* factors to consider:

Which entity's former management dominates the combined entity? | Which entity's former owners have the greatest number of votes in the combined entity. | Which entity was bigger.

Identify the acquisition date definition.

The date on which the parent obtained control over the subsidiary.

Professional fees - accounting treatment

expensed to PoL.

Why the use of NCI at acquisition at FV measure or Proportionate method choice has significant impact on impairment review?

The group has recognised FULL GOODWILL so this can be added together with the other net assets of the subsidiary and compared with the recoverable amount.

Associate definition

'an entity over which the investor has significant influence'

Significant influence DEFINITION:

The power to participate | in the financial and operating | policy decisions of an entity.

A holding of between 20% and 50% of the ... is presumed to give significant influence.

voting power

Joint arrangements definition:

arrangements where 'two or more parties have joint control'

Joint control exist when:

when the relevant activities require unanimous consent of the parties that share control over the entity.

types of Joint arrangements:

joint operation | joint venture

Joint operation - venturers have rights to...

assets | and obligations of the arrangement.

Joint venture - venturers have rights to...

to net assets of the arrangements.

Joint venture accounting treatment.

Equity accounting.

Joint operation accounting treatment:

Accounts for share of assets, liabilities, income and expenses.

In separate FSs, investments in subsidiaries, joint ventures or associates can be accounted for in one the following ways:

Cost.| Equity method.| In accordance with IFRS 9 Financial Instruments.