CIMA Exam CIMAPRA19-F01-1 Topic 5 Question 96 Discussion

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

Question #: 96
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 Lili at Sep 11, 2024, 02:53 AM

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Luis

5 months ago

Haha, option D is a real head-scratcher. Recognizing it as a gain in the statement of changes in equity? What is this, some kind of accounting magic trick?

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Cherri

5 months ago

C) Recognise as a deduction from goodwill in the consolidated statement of financial position.

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Erick

5 months ago

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

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Renea

5 months ago

A) Recognise as a gain in the consolidated statement of profit or loss.

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Rusty

6 months ago

Hmm, I'm not sure. Option B about releasing the deferred credit over its useful life seems a bit convoluted. I'll have to think about this one.

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Winifred

4 months ago

Nguyet: Yeah, it simplifies things rather than spreading it out over time.

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Nguyet

4 months ago

User 2: I agree, that seems like the correct accounting treatment.

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Matilda

5 months ago

I think option C makes sense, deducting it from goodwill.

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Dahlia

6 months ago

Option C looks good to me. Deducting the difference from goodwill makes sense, as it's essentially a bargain purchase.

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Clorinda

5 months ago

Yeah, recognizing it as a deduction from goodwill in the consolidated statement of financial position seems appropriate.

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Lai

5 months ago

It does seem like a bargain purchase, so option C makes sense.

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Ivette

5 months ago

I agree, deducting the difference from goodwill makes sense.

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Page

5 months ago

I think option C is the correct accounting treatment.

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Alfred

6 months ago

I think the answer is D, based on the rationale that it should be recognized as a gain.

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Yvette

6 months ago

I'm not sure, but I think it might be A.

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Peggie

7 months ago

I disagree, I believe it should be B.

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Lynelle

7 months ago

I think option A is the correct answer. Recognizing the difference as a gain in the consolidated statement of profit or loss seems like the most straightforward approach.

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Jacklyn

6 months ago

I think option C is more appropriate, recognizing it as a deduction from goodwill in the consolidated statement of financial position.

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Wilda

6 months ago

I agree, recognizing it as a gain in the consolidated statement of profit or loss makes sense.

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Carin

7 months ago

I think the correct answer is C.

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