Answered: Tech plc and Cap plc have a joint…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Tech plc and Cap plc have a joint arrangement in which the former contributes PPEs and the later contributes the cash from its loan with a bank. After 10 years, Tech will keep PPEs and Cap will pay off the debt.

Which of the following statements is/are incorrect?

(i) IFRS require that Tech plc shall use full consolidation to account for the joint arrangement.

(ii) IFRS require that Cap plc shall use the equity method to account for the joint arrangement.

(iii) IFRS require that Tech plc and Cap plc shall report their own contributed assets and liabilities on their consolidated statement of financial position.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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