The Requirements of AASB 128 Relating to the Equity Method

question 3

Multiple Choice

The requirements of AASB 128 relating to the equity method of accounting for investments in associates include:

• A) Adjustments for impairment losses recognised by the associate.
• B) The notional adjustment of the carrying amounts of the identifiable assets, liabilities and contingent liabilities of the associate to fair value.
• C) The calculation of a notional goodwill or excess on acquisition that is not required to be separately disclosed.
• D) The revision of depreciation expense based on the notional fair value of the identifiable assets at the time of acquisition.
• E) All of the given answers.

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Definitions:

Percentage Of Sales

A financial ratio that compares a particular expense or income to the total sales, expressing the result as a percentage to analyze trends or performance.

Margin Of Safety

The difference between actual or projected sales and the break-even point, usually expressed in percentage terms, indicating the buffer against a loss.

Operating Leverage

The degree to which a firm can use fixed operating costs to magnify the effects of changes in revenue on its operating income.

Salesvolume

Refers to the total number of units sold within a specific period.