Read the summary and the most important questions on Samenvatting Financial Accounting

• 1

  This is a preview. There are 22 more flashcards available for chapter 1
  Show more cards here

• Business combinations can have several legal apprearances:

  * Purchase of shares
  * Purchase of net assets
  * Legal mergers
  * Establishment of new entities to control the combining entities
  * Reverse acquisition

• Voting rights could give power, but there are rights other than voting:

  * Purpose and design (IFRS 10.B5-8)
  * Evidence of practical ability to direct (IFRS 10.B18/21)
  * Special relationships (IFRS 10.B19)
  * Exposure to veriability to return (IFRS 10.B20)

• Purpose and design (IFRS 10.B5-8)

  Ø involvement and decision made at inception about contracts, risks, opportunities – may indicate that investor has the opportunity to obtain rights that are sufficient to give it power
  Ø Contractual arrangement established at investee’s inception
  Ø Investor’s commitments to continued operation of investee – may increase investor’s exposure to variability of returns and thus increase incentives to obtain rights that are sufficient to give it power 

• Evidence of practical ability to direct (IFRS 10.B18/21)

  Could be the appointment of key management personnel, directing investee to inter into a significant transaction for investee’s benefit or dominating either nominations process for electing members of investee’s governing body or obtaining of proxies from other holders of voting rights. 

• Special relationships (IFRS 10.B19)

  Sometimes there will be indications that the investor has a special relationship with the investee, which suggests that the investor has more than a passive interest in the investee.

• Exposure to variability of returns (IFRS 10.B20) 

  Having a large exposure to variability of returns is an indicator that the investor may have power.

• Exposure to variability in returns

  Does the entity get exposed to the variable returns from its investment? (IFRS 10.15/16 & B55-57)

• Ability to use power to affect the returns

  Will the entity able to use power to affect the returns? (IFRS 10.17/18 & B58-72) - link between power and return.

• What are the two exemption from IFRS 3?

  · Joint arrangements – arrangement in which two or more parties have joint control (IFRS 11)
  · Entities or business under common control – have the same ultimate parent 

• What are the two kinds of joint arrangements? (IFRS 11.4-7)

  * Joint operations (IFRS 11.15/20)
  * Joint ventures (IFRS 11.16/24)