State whether the following statements are true or false and justify your answer in each case: a) The investor's relative exposure to the risks and rewards of the investee is known as the investor's 'extent of equity ownership' in the investee. b) The investor's 'extent of equity ownership' in the investee determines whether the investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements. c) The investor's degree of influence over an investee increases as the investment changes from a simple investment to a subsidiary. finally reaching the strongest degree of influence when the subsidiary becomes an associate. d) An investment over which the investor has significant influence is called an associate. e) An investee that is jointly controlled by the investor is called a subsidiary. f) The only instance where the investor may equity account for its investee is when such an investee is classified as an associate. g) Financial statements are called 'consolidated financial statements' when these include the financial position and financial performance of at least one subsidiary. associate or joint h) An investor that is involved in the production of tinned fish has purchased 80% of the voting rights of a company that sells light bulbs. Because the nature of the investor's business is so different from the nature of investee's business, the investor is not required to consolidate the investee. i) An investor that controls an investment entity is not required to consolidate this investment entity if it is measured by the investor at fair value through profit or loss. j) Consolidation of a subsidiary is not required by the parent if either one of the conditions mentioned in 'FRS 10.4 is present.
State whether the following statements are true or false and justify your answer in each case:
a) The investor's relative exposure to the risks and rewards of the investee is known as the
investor's 'extent of equity ownership' in the investee.
b) The investor's 'extent of equity ownership' in the investee determines whether the
investee is equity accounted. consolidated or simply measured as an investment in the investor's consolidated financial statements.
c) The investor's degree of influence over an investee increases as the investment changes
from a simple investment to a subsidiary. finally reaching the strongest degree of influence when the subsidiary becomes an associate.
d) An investment over which the investor has significant influence is called an associate.
e) An investee that is jointly controlled by the investor is called a subsidiary.
f) The only instance where the investor may equity account for its investee is when such an
investee is classified as an associate.
g) Financial statements are called 'consolidated financial statements' when these include the
financial position and financial performance of at least one subsidiary. associate or joint
h) An investor that is involved in the production of tinned fish has purchased 80% of the
voting rights of a company that sells light bulbs. Because the nature of the investor's business is so different from the nature of investee's business, the investor is not required to consolidate the investee.
i) An investor that controls an investment entity is not required to consolidate this
investment entity if it is measured by the investor at fair value through profit or loss.
j) Consolidation of a subsidiary is not required by the parent if either one of the conditions
mentioned in 'FRS 10.4 is present.
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