CRDA - DEC 2026

CRDA

IFRS 10 Definition of control

An investor controls an investee and only if the investor has all of the following:

-Power over the investee*

-Exposure or rights to variable returns from its involvement with the investee

-Ability to use its power over the investee to affect the amount of the investors returns

Power = current ability to direct the activities that significantly affect investee’s returns

When do you presume a parent has control in a sub

When the parent owns >50% of the voting rights of an entity

What is non controlling interest

Portion of subsidiary’s net assets and results belonging to external owners rather than the parent.

What does goodwill represent

Premium paid by the parent to acquire a subsidiary above its fair market value

Accounting equation

Assets = Equity + Liabilities

Assets - Liabilities = Equity = Net assets

How to calculate goodwill

Cost of investment (consideration) X

NCI @ Acquisition X

LESS

Fair value of sub’s net assets (X)

@ acquisition

Goodwill @ Acquisition X

LESS Impairment (X) - W5

Goodwill @ Reporting date X

How to record movement in fair value of contingent cash consideration between the acquisition date and the year end

Increase in FV of contingent cash:

Dr SPL, Cr Liabilities

Decrease in FV of contingent cash:

Dr Liabilities Cr SPL

**As SPL is impacted this also impacts W5 group retained earnings

Double entry for deferred cash

Dr investments

Cr liabilities (PV)* (Discounting rate provided in exam)

*Unwind each year = Dr Finance costs Cr Liabilities

Contingent cash double entry

Dr Investments

Cr Liabilities (FV)

Liabilities recognised in accordance with prudence concept

Double entry for 3 types of shares

1) Shares issued immediately

Dr Investments

Cr Share cap

Cr Share premium

2) Deferred/ Contingent shares

Dr Investments

Cr Shares to be issued

**CR should be included at the fair value at acquisition date

Types of fair value adjustments

Fair value adjustment proforma

Per IFRS 3, how is contingent cash recognised when calculating consideration for goodwill

Contingent consideration is recognised at fair value at acquisition

What is a associate and what % is required for control and significant influence

Where a investor does not have control but it does have significant influence

Significant influence is presumed if investor has 20-50%. Even if 50% would be associate.

To Control a entity, need >50%

How to account for PURP in associates (Parent selling to associate and Associate selling to parent)

How to account for disposal of a subdidiary in the parents individual accounts

Dr Cash/receivables (proceeds)

Cr Investment

Cr SPL (If profit) Dr SPL (if loss)

*P/L is reported as a exceptional item and should be disclosed separately on the face of the parent’s statement of P/L after operating profit.

What are group auditors expected to do

Not expected to re perform the audits of the individual parent or subsidiary financial statements, but focus on auditing the balances included in the consolidated financial statements, including consolidation adjustments.

What is aggregation risk

The probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.

What is component peformance materiality

Amount set by the group auditor to reduce aggregation risk to an appropriately low level for purposes of planning and performing audit procedures in relation to a component

What are the 6 assertions for the P/L

O - Occurrence

C - Completeness

A - Accuracy

C - Cut off

C - Classification

P - Presentation

What are balance sheet assertions?

E - Existence

R - Right and obligations

C - Completeness

A - Accuracy, valuation & allocation

C - Classification

P - Presentation

How are changes to accounting policies and accounting estimates applied

Accounting policy - Applied retrospectively, prior year figures would be restated. E.G. change from avco to fifco inventory measurement

Estimates - Applied prospectively, prior financial periods are not restated. E.G. Depreciation method change

Criteria for asset held for sale

-Available for immediate sale / highly probable

-Marketed at reasonable price

-Sale expected within 1y

-Unlikely plan will be changed/cancelled

-Active programme to locate a buyer

-Management committed to selling

How are variable and fixed overheads allocated

Variable = Actual level of production.

Fixed = Fixed level of production

How to calculate earnings per share

Profit/(loss) company made during the year

Weighted average number of shares during the period

Sale and leaseback right of use asset formula

Carrying amount @ disposal * ( Lease liability preent value / Fair value or sale proceeds )

When to recognise a contingent asset and liability

Disposal of a subsidiary pro forma

Proceeds

+NCI at disposal (depends on proportionate or FV method)

-Net assets at disposal

-Goodwill at disposal

=Group profit or loss on disposal

PARENT GETS = PROCEEDS + RETAINED INTEREST

NCI + GOODWILL LEAVES THE GROUP

NCI OWNED PART OF WHATS LEFT HENCE ADDED

What is the difference between audit plan and strategy

Audit strategy focuses on the big picture: e.g. agreeing a approach to audit inventory

Audit plan is the detailed work auditors are going to perform :e.g agree 10 sales invoices

Pro forma for goodwill

Consideration X

NCI @ Acquisition X

FV of assets @ Acquisition (X)

Goodwill @ Acquisition X

Impairment (X)

Goodwill @ Reporting date

If a parent sells a subsidiary, how should the results be shown in the consolidated SPL

Entity will be a discontinued operation under IFRS 5, as it represents a separate major line of business which is ceasing to exist.

The results should be shown in a single line called ‘ discontinued operations ‘ below the profit from continuing operations.

Per IFRS 16 sale and leaseback where sale occurs at fair value:

% Retained = PV lease payments / FV asset value.

% Transferred out of entity = 100% - % retained

Gain recognised = total gain * % transferred.

(Don’t recognise asset portion still held in business as a sale)

When can an intangible be revalued?

When there is a active market. Rare for an active market to exist:

-items need to be traded within the market which are identical

-willing buyers and sellers can be found at any time

-prices are available to the public.

Per IAS 10 when should a event be a adjusting event

When evidence of a condition exists at reporting date alreaadu

Fee thresholds for audits

Non listed - regularly must not exceed 15% of firms income

Listed - 5%

What do you capitalise as part of a right of use asset

-Future payments discounted to present value

-Any up front payments, e.g. deposits or payments in advance

-Costs directly attributable to leasing asset

-Costs to dismantle and restore land (e.g. proision)

Note: deduct any lease incentives payments from lessor

How is impairment on NCI on fair value basis accounted for, and on proportionate basis

Proportionate - recognise impairment just in SUb.

Fair value - Goodwill calculated relates to both the parent and NCI. So if impairment is recognised then it is suffered by both the parent and nci.

How to calculate NCI on proportionate basis

NCI on net assets @ acquisition X

Add: NCI share of post acquisition reserves X

NCI @ Reporting date X

How is unrealised profit treated from the selling company (SPL)

Added to COS and decreases RE/

How do you treat the original cost of purchasing the subsidiary on a CSOFP

Deduct original cost from investments

Difference between impairment on proportionate and fair value method

Impairment: proportionate goodwill fully allocated

Fair value method: only deduct group share of impairment.

NCI% * Goodwill impairment ( FV METHOD ONLY)

How to calculate profit or loss on disposal of a subsidiary

Sale proceeds

Add back: attributable to non controlling interest X

Less: carrying amount of good will at disposal

Less: Carrying amount of net assets at disposal

Profit on disposal

How to treat a PURP adjustment in consolidated SPL

Add to COS of the company what sold the goods

ISA 240 Appendix 3

-Useful reference for examples of circumstances that indicate possibility of fraud

IAS 38 Intangible recognition criteria

Probable Future Economic Benefits: It is probable that the expected future economic benefits (such as revenues or cost savings) attributable to the asset will flow to the entity

Reliable Measurement: The cost of the asset can be measured reliably

A active market is required if they wish to revalue

How to structure a audit procedure in the exam

Action - verb

Source - document/person/object

Objective - purpose of procedure/assertion(s) tested

Types of modified audit opinions

Disclaimer - not enough info to draw a conclusion

Qualified - material but not pervasive

Adverse - material & pervasive

Report to those charged with governance

3 Columns

1) Control deficiency found 2) Outline possible consequences 3) Provide recommendations

4th column for manager response.

Ensure to contain a disclaimer that it only covers deficiencies identified during the audit not all possible deficiencies

Types of auditors report

Explicit opinion - true and fair view

Implicit opinion - required if:

Returns not received from branches

Accounts not in agreement with underlying records

Proper/adequate accounting records not kept

Information/explanations not received

Directors remuneration disclosures ommitted

Summary of audit report

Management V Auditors responsibility in relation to reporting on going concern

1. Management responsibility: Prepare the financial statements on the going concern basis and conduct a GC assessment covering 12 months from approval date.

2. Auditors responsibility: Obtain evidence to evaluate if a material uncertainty exists surrounding the going concern status and if managements use of GC basis is appropriate.

What needs to be disclosed relating to a RPT

-Nature of transaction

-Amount

-Who it’s wish

-Outstanding balance @ YE

Difference between other matters and emphasis of matter

Emphasis of matter highlights something already disclosed in accounts

Other matter addresses external context, e.g. not paying suppliers early

Matters on which we are required to report by exception

-Inadequate accounting records

-Discrepancy in FS

-Missing remuneration/Info/Explanations

Consolidated statement of cash flows

Acquisition of sub → ADD to bf CSOFP

Disposal of sub → DEDUCT from b/f CSOFP

Add / deduct all assets, liabilities and NCI at date of acquisition / disposal - EXCEPT CASH.