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EFA4S08 ©CGA-Canada, 2008 Page 1 of 10 CGA-CANADA FINANCIAL ACCOUNTING: CONSOLIDATIONS & ADVANCED ISSUES [FA4] September 2008 Marks Time: 4 Hours Notes: 1. All calculations must be shown in an orderly manner to obtain part marks. 2. Round all calculations to the nearest dollar. 3. Narratives for journal entries are not required unless specifically requested. 4. Assume a December 31 fiscal year end unless specifically stated otherwise. 5. Assume all amounts are material unless directed otherwise. 6. Assume all companies are public companies unless otherwise noted. 7. Assume no companies use differential reporting unless otherwise noted. 30 Question 1 Select the best answer for each of the following unrelated items. Answer each of these items in your examination booklet by giving the number of your choice. For example, if the best answer for item (a) is (1), write (a)(1) in your examination booklet. If more than one answer is given for an item, that item will not be marked. Incorrect answers will be marked as zero. Marks will not be awarded for explanations. Note: 2 marks each a. The qualitative characteristics of relevance and reliability are sometimes in conflict. Which of the following would most improve the reliability of an entity’s financial information? 1) Information that is more useful in making future predictions 2) Information that is delivered before it loses its capacity to influence decisions 3) Information that allows identification of similarities to other entities’ information 4) Information that is free from consistent understatement/overstatement b. Which of the following is true regarding international accounting standard (IAS) harmonization? 1) Harmonization benefits the tax-driven nature of many countries’ national accounting regimes. 2) Currently there is no effective enforcement agency to ensure compliance with IAS Board (IASB) standards. 3) U.S. accounting standards allow for more professional judgment than IASB standards. 4) The IASB is not subject to political pressure in standard setting. c. Which of the following best describes the Canadian Accounting Standards Board’s (AcSB) accounting strategy for convergence with international accounting standards? 1) By 2011, convergence with International Financial Reporting Standards (IFRS) for all public, private, and not-for-profit organizations 2) By 2011, convergence with U.S. standards for all public and private companies 3) By 2011, convergence with IFRS for all public companies 4) By 2011, convergence with U.S. standards for all public companies Continued. ..
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EFA4S08 ©CGA-Canada, 2008 Page 2 of 10 Note: Use the following information to answer parts (d) and (e). On January 1, 2006, Hot Company acquired 25% of the common shares of Cold Corporation, giving it significant influence. At that time, Cold’s financial statements included common shares of $250,000 and retained earnings of $1,350,000, and the goodwill associated with the share acquisition was $150,000. There was no difference between the book value and fair value of Cold’s identifiable assets and liabilities.
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