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CIMA F2 - F2 Advanced Financial Reporting

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Total 268 questions

Which TWO of the following are TRUE in respect of preparing a consolidated statement of cash flows where there has been an acquisition of a subsidiary part way through the year?

A.

Investing activities will include a total cash outflow for the acquisition comprising the cash paid for the subsidiary less the cash held by the subsidiary at the acquisition date.

B.

The working capital held by the subsidiary at acquisition will be excluded from the year end figures based on the percentage shareholding in the subsidiary.

C.

Non-controlling interest will arise in relation to the subsidiary and any dividends paid to the non-controlling interest will be shown within financing activities as a cash outflow.

D.

Any shares that were issued on acquisition of the subsidiary will be shown separately on the statement of cash flows within financing activities.

E.

The year end cash and cash equivalents balance will be reduced by the cash and cash equivalents that were held by the subsidiary at the acquisition date.

On 30 November 20X9 OPQ acquires a financial asset that is classified as Available for Sale.

Which of the following describes the value of the financial asset on the date of acquisition?

A.

Fair value excluding transaction costs.

B.

Fair value including transaction costs.

C.

Present value including transaction costs.

D.

Present value excluding transaction costs.

MNO has calculated its return on capital employed ratio for 20X4 and 20X5 as 41% and 56% respectively.

Taking each statement in isolation, which would explain the movement in the ratio between the 2 years?

A.

In 20X5 the average interest rate on borrowing decreased compared to 20X4.

B.

In 20X4 an onerous contract was provided for and this provision did not change in 20X5.

C.

In 20X5 the increase in value of MNO's head office was reflected in the financial statements.

D.

In 20X4 an unused building was sold at a price in excess of its carrying value.

Which of the following actions would be most likely to improve an entity's gross profit margin?

A.

Negotiating with trade suppliers for a bulk purchase discount

B.

Offering increased credit to customers

C.

Reducing administrative expenses by 10%

D.

Writing down the value of obsolete inventories

CD acquired 100% of the equity share capital of FG for cash consideration of Kr1,200,000 on 1 January 20X7.

Retained earnings of FG at the date of acquisition was Kr800,000. CD operates from Country A and its functional and presentation currency is $. FG is located and trades throughout Country B and its functional currency is the Krona (Kr).

CD has no other subsidiaries. Goodwill had not suffered any impairment to date.

Summarised data from the statements of financial position for both entities at 31 December 20X7 is presented below:

Which of the following is the correct application of IAS 21 The Effects of Changes in Foreign Exchange Rates in translating FG's statement of financial position into the presentation currency of CD for consolidation purposes at 31 December 20X7?

A.

   • Goodwill at closing rate.

   • Assets and liabilities at closing rate.

B.

   • Monetary assets and liabilities at closing rate.

   • Non monetary assets and liabilities at historic rate.

C.

   • Goodwill at historic rate.

   • Assets and liabilities at closing rate.

D.

   • Monetary assets and liabilities at historic rate.

   • Non monetary assets and liabilities at closing rate.

XY puchased 2% of the equity shares of FG on 1 October 20X3.

XY paid $25,000 for the shares as well as a transaction cost of 2.5% of the purchase price.

The shares are being held for short term trading and XY intend to sell them in December 20X3.

At the year end of 31 October 20X3, the shares in FG could be sold for $28,000.

What is the journal entry to record the subsequent measurement for this investment at 31 October 20X3?

A.

Debit investment in equity shares $3,000 and credit profit or loss $3,000.

B.

Debit investment in equity shares $3,000 and credit other reserves $3,000.

C.

Debit investment in equity shares $2,375 and credit profit or loss $2,375.

D.

Debit investment in equity shares $2,375 and credit other reserves $2,375.

Which of the following statements are incorrect regarding identifiable assets? Select ALL that apply.

A.

Deferred tax assets and liabilities are not classed as identifiable assets

B.

Contingent assets and liabilities are examples of exceptions to the rules governing identifiable assets

C.

To be identifiable assets must be separable from the subsidiary

D.

Assets can also be identifiable if they arise from contractual or legal rights

E.

Net assets must be identifiable at acquisition

Which of the following examples would be classed as related parties ofJH Ltd due to the power they possess to directly influence the company?

1: JH Ltd's managing director

2: The son of JH Ltd's managing director, who is an intern in the company's office

3: The brother of JH Ltd's managing director, whose business supplies a large amount of production material for the company

4: JH Ltd's subsidiary company, AL Ltd

5: BR PLC, one of JH Ltd's regular customers

A.

1&4

B.

1

C.

1, 2, 3 & 4

D.

2, 3 & 4

E.

1, 2 & 3

F.

All of the above

Which of the following options provides a representation of how the non controlling interest in FG is measured in CD's consolidated statement of financial position at 31 December 20X8?

A.

• FV of NCI at acquisition; plus

• NCI's share of post acquisition reserves of FG; plus

• NCI's share of accumulated exchange differences arising on goodwill of FG.

B.

• FV of NCI at acquisition; plus

• NCI's share of post acquisition reserves of FG; plus

• NCI's share of exchange difference arising on goodwill of FG for the year.

C.

• FV of NCI at reporting date; plus

• NCI's share of post acquisition reserves of FG; plus

• NCI's share of exchange difference arising on goodwill of FG for the year.

D.

• FV of NCI at reporting date; plus

• NCI's share of group reserves; plus

• NCI's share of accumulated exchange differences arising on goodwill of FG.

The following information relates to DEF for the year ended 31 December 20X7:

• Property, plant and equipment has a carrying value of $3,500,000 and a tax written down value of $2,500,000.

• There are unused tax losses to carry forward of $1,250,000. These tax losses have arisen due to poor trading conditions which are not expected to improve in the foreseeable future.

• The corporate income tax rate is 25%.

In accordance with IAS 12 Income Taxes, the financial statements of DEF for the year ended 31 December 20X7 would recognise deferred tax balances of:

A.

Option A

B.

Option B

C.

Option C

D.

Option D