Question 1

It is possible for aggregated direct and indirect minority interests in an entity to be a greater percentage of ownership than the parent's aggregated direct and indirect ownership interests:

Accepted Answer

In a consolidated entity, the parent's ownership interest, both direct and indirect, will always be equal to or greater than the minority interests, as the parent must have control over the entity.

Question 2

Non-sequential acquisition is when a parent acquires its interest in the intermediate subsidiary before the intermediate subsidiary acquires its interest in the other subsidiary.

Accepted Answer

False

Question 3

A Ltd owns 80 per cent of the issued capital of B Ltd,B Ltd owns 70 per cent of the issued capital of C Ltd,and B Ltd owns 50 per cent of the issued capital of D Ltd.The only entity that is not an immediate parent entity is D Ltd.

Accepted Answer

False

Question 4

A Ltd owns 75 per cent of the issued capital of B Ltd,B Ltd owns 69 per cent of the issued capital of C Ltd,and C Ltd owns 60 per cent of the issued capital of D Ltd.The only entity that is not an immediate parent entity is D Ltd,and A Ltd is the ultimate parent entity:

Accepted Answer

The answer of A Ltd owns 75 per cent of...

Question 5

It is not possible for one entity to control another entity without any direct ownership interest:

Accepted Answer

It is possible for one entity to control another entity without direct ownership interest through various means such as contracts, agreements, management control, and other forms of influence.

Question 6

A Ltd owns 60 per cent of the issued capital of B Ltd and B Ltd owns 55 per cent of the issued capital of C Ltd.What is A's interest in C Ltd?

Accepted Answer

To calculate A's interest in C Ltd, we need to multiply A's ownership in B Ltd (60%) with B's ownership in C Ltd (55%). Therefore, A's interest in C Ltd is 60% x 55% = 33%.

Question 7

The following diagram represents the ownership of issued share capital of the companies in a group.What is the ownership interest of A Ltd in D Ltd?

Accepted Answer

The answer of The following diagram represents the ownership of...

Question 8

A Ltd owns 85 per cent of the issued capital of B Ltd and B Ltd owns 90 per cent of the issued capital of C Ltd.What is the total outside equity interest in C Ltd?

Accepted Answer

A Ltd owns 85% of B Ltd, and B Ltd owns 90% of C Ltd. Therefore, A Ltd's effective ownership in C Ltd is 85% * 90% = 76.5%. The outside equity interest in C Ltd is therefore 100% - 76.5% = 23.5%.

Question 9

When a parent acquires its interest in an intermediate subsidiary after the intermediate subsidiary acquires an interest its own subsidiary,this is referred to as a non-sequential acquisition:

Accepted Answer

The answer of When a parent acquires its interest in...

Question 10

The non-controlling interest in post-acquisition movement in reserves and post-acquisition profits is based on the combined sum of both direct non-controlling interest and indirect non-controlling interest.

Accepted Answer

The answer of The non-controlling interest in post-acquisition movement in...

Question 11

Non-sequential acquisition is when a parent acquires its interest in the intermediate subsidiary after the intermediate subsidiary acquires its interest in the other subsidiary.

Accepted Answer

The answer of Non-sequential acquisition is when a parent acquires...

Question 12

Non-controlling indirect interests are entitled to receive dividends in a subsidiary.

Accepted Answer

The answer of Non-controlling indirect interests are entitled to receive...

Question 13

A Ltd owns 75 per cent of the issued capital of B Ltd and B Ltd owns 65 per cent of the issued capital of C Ltd.What is the total outside equity interest in C Ltd?

Accepted Answer

The answer of A Ltd owns 75 per cent of...

Question 14

A Ltd owns 60 per cent of the issued capital of B Ltd,B Ltd owns 80 per cent of the issued capital of C Ltd,and B Ltd owns 70 per cent of the issued capital of D Ltd.The ultimate parent entity is B Ltd.

Accepted Answer

According to the given information, B Ltd owns 80% of C Ltd and 70% of D Ltd, making it the parent entity of both C Ltd and D Ltd. Therefore, the ultimate parent entity is not B Ltd, rather it is the parent entity of B Ltd.

Question 15

An ultimate parent entity may obtain a controlling indirect interest in another entity as a result of holding a controlling interest in the immediate parent entity of that other entity:

Accepted Answer

The answer of An ultimate parent entity may obtain a...

Question 16

A Ltd owns 80 per cent of the issued capital of B Ltd and B Ltd owns 60 per cent of the issued capital of C Ltd.What is A's interest in C Ltd?

Accepted Answer

A Ltd owns 80% of B Ltd, which in turn owns 60% of C Ltd. 
Therefore, A's interest in C Ltd is: 
80% x 60% = 48%.

Question 17

The order of acquisition of subsidiaries (i.e.,sequential or non-sequential)is of no consequence when it comes to calculating minority interests; they are calculated the same way regardless of the order:

Accepted Answer

The answer of The order of acquisition of subsidiaries (i.e.,sequential...

Question 18

The non-controlling interest in post-acquisition capital and reserves will be based on direct non-controlling interest.

Accepted Answer

The answer of The non-controlling interest in post-acquisition capital and...

Question 19

In calculating indirect minority interests,intragroup transactions need not be eliminated.

Accepted Answer

In calculating indirect minority interests, intragroup transactions are eliminated, as they represent transactions between the parent company and its subsidiaries, and not transactions with third parties. This elimination ensures that the minority interest is calculated based on the value of the subsidiaries as if they were standalone entities.

Question 20

The elimination of the parent entity's investment in a subsidiary will be done by eliminating the investment against the parent entity's direct and indirect ownership interest in pre-acquisition share capital and reserves.

Accepted Answer

The answer of The elimination of the parent entity's investment...

Quiz 31: Further Consolidation Issues III: Accounting for Indirect Ownershi