Under IFRS 3 the Method of Accounting for a Business

question 6

Multiple Choice

Under IFRS 3 the method of accounting for a business combination is the:

• A) joint venture method
• B) purchase method
• C) market value method
• D) acquisition method

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Definitions:

Jensen Measure

A risk-adjusted performance measure that calculates the average return on a portfolio or fund over and above that predicted by the Capital Asset Pricing Model (CAPM), given the portfolio's or fund's risk.

Market Portfolio

A theoretical bundle of investments that includes every asset in the market, weighted by market capitalization; often used as a benchmark in the capital asset pricing model (CAPM).

Risk-Free Return

The return on an investment with no loss of principal, often associated with government bonds.

Geometric Average Return

The average rate of return on an investment per year, compounded annually, representing the compounded growth rate over time.