CIMA Exam CIMAPRA19-F01-1 Topic 5 Question 105 Discussion

Actual exam question for CIMA's CIMAPRA19-F01-1 exam

Question #: 105
Topic #: 5

An entity acquires 100% of the equity shares in another entity.

The consideration paid for the shares is less than the fair value of the net assets acquired.

Which of the following is the correct accounting treatment for the difference between the consideration paid and the fair value of the net assets acquired, in accordance with IFRS 3 Business Combinations?

ARecognise as a gain in the consolidated statement of profit or loss.

BRecognise as a deferred credit and release to consolidated profit or loss over its useful economic life.

CRecognise as a deduction from goodwill in the consolidated statement of financial position.

DRecognise as a gain in the statement of changes in equity.

Show Suggested Answer

Suggested Answer: A

by Vivan at Jan 13, 2025, 12:09 PM

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Cora

2 months ago

Option C is the clear choice here. Deducting the difference from goodwill is the most straightforward solution.

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Shelton

2 months ago

But why do you think that? Can you explain your rationale?

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Merissa

2 months ago

Option A is the way to go! Recognizing a gain is like finding a hidden treasure. Jackpot!

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Glory

1 months ago

User 2: Yeah, it's like hitting the jackpot!

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Alberta

2 months ago

User 1: I think recognizing a gain is the best option.

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Hildred

2 months ago

I disagree, I believe the correct answer is B.

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Brent

2 months ago

I'm going with option D. Recognizing it as a gain in the statement of changes in equity just feels right to me.

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Arleen

2 months ago

Option B seems like a reasonable approach. Recognizing it as a deferred credit and releasing it over time seems logical.

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Tamesha

1 months ago

I believe recognizing it as a deduction from goodwill in the consolidated statement of financial position is the correct treatment.

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Graciela

1 months ago

I think recognizing it as a gain in the consolidated statement of profit or loss is more appropriate.

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Miesha

1 months ago

I agree, recognizing it as a deferred credit makes sense.

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Shelton

2 months ago

I think the correct answer is C.

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Laine

2 months ago

Hmm, I'm not so sure. Option C seems more appropriate, as the difference should be deducted from goodwill.

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Patrick

2 months ago

I think option A is correct. It makes sense to recognize the difference as a gain in the consolidated statement of profit or loss.

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Florinda

2 months ago

I'm not sure about option C, recognizing it as a deduction from goodwill. What do you think?

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Nobuko

2 months ago

I think option B could also be a valid choice, as it involves recognizing the difference over its useful economic life.

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Azalee

2 months ago

I agree with you, option A seems like the correct accounting treatment.

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