AASB 3 Specifies That Where a Parent Entity Purchases Additional

question 2

Multiple Choice

AASB 3 specifies that where a parent entity purchases additional shares in a subsidiary over time:

• A) No further goodwill on purchase may be recognised. Any excess payment over the fair value of the additional net assets purchased is to be written off in the period of the purchase.
• B) Each purchase of shares is to be treated as part of a single, combined purchase so that the amount of goodwill reported in the consolidated financial statements cannot be increased at the discretion of the controlling entity.
• C) Goodwill would be recognised by a single consolidation journal entry at that point in time when the parent entity ultimately gains control of the subsidiary.
• D) The parent entity may choose between treating the purchases separately or combining them into a single transaction.
• E) None of the given answers.

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Definitions:

Cash Sales

Cash sales refer to transactions where payment is made in full with cash at the time of the sale, without any credit.

Cheque Processing Time

The period it takes from when a cheque is issued until the funds are available in the payee’s account, reflecting bank processing durations.

Trade Discount

A reduction in the listed price of a product or service offered by sellers to buyers in the business-to-business sales.

Break-Even Default Rate

The rate at which the losses from defaulted loans equal the income generated from interest payments in a lending portfolio.