FAC2602 Assignment 1 Semester 1 2026
Financial Accounting for Groups | 150 Practice Questions with Answers
UNISA | Comprehensive Exam Preparation | Verified Solutions | Graded A+
SECTION 1: IFRS 10 – CONSOLIDATED FINANCIAL STATEMENTS & CONTROL
Questions 1–25
Question 1
IFRS 10 governs which accounting area?
A) Revenue recognition
B) Consolidated financial statements
C) Inventory valuation
D) Leases
Correct answer: B
Rationale: IFRS 10 provides guidance on the preparation of consolidated financial statements
and the concept of control. This standard establishes the principles for presenting consolidated
financial statements when an entity controls one or more other entities.
Question 2
According to IFRS 10, control exists when an investor has all of the following EXCEPT:
A) Power over the investee
B) Exposure or rights to variable returns
C) Ability to use power to affect returns
D) A majority shareholding (always required)
Correct answer: D
Rationale: Control can exist with less than 50% ownership through other means (contractual
arrangements, voting agreements, etc.). IFRS 10 defines control based on three elements:
power, exposure to variable returns, and the ability to use power to affect returns.
,Question 3
According to IFRS 10, an investor (parent) controls an investee (subsidiary) when the investor is
exposed or has rights to variable returns from its involvement with the investee and:
A) Has the ability to affect those returns through its power over the investee
B) Holds more than 50% of the investee's share capital
C) Has appointed a majority of the investee's board members
D) Has invested more than R1 million in the investee
Correct answer: A
Rationale: IFRS 10 requires all three control elements to be present: power over the investee,
exposure/variable returns, and the ability to use power to affect the investor's returns.
Question 4
A subsidiary is an entity that is:
A) Owned 100% by another entity
B) Controlled by another entity (parent)
C) Always a public company
D) Never consolidated
Correct answer: B
Rationale: A subsidiary is defined by control, not necessarily 100% ownership. Control is the
determining factor for classifying an entity as a subsidiary.
Question 5
What percentage of voting rights is normally presumed to give an investor control over an
investee under IFRS 10?
A) 20% or more
B) 25% or more
C) 33% or more
D) 50% or more
,Correct answer: D
Rationale: Under IFRS 10, an investor is presumed to have control when it holds more than
50% of the voting rights of the investee. However, control may also be demonstrated in other
ways.
Question 6
The essence of consolidations in group accounting is that:
A) The parent is able to control the policy and management of the subsidiary
B) All subsidiaries must be wound up into a single company
C) The group must be listed on a stock exchange
D) Subsidiaries are not allowed to have their own management
Correct answer: A
Rationale: The essence of consolidation is control: the parent can direct the financial and
operating policies of the subsidiary, enabling the group to be seen and managed as a single
economic unit.
Question 7
Non-controlling interest (NCI) represents:
A) The parent's share of subsidiary equity
B) The portion of subsidiary equity not attributable to the parent
C) Only preference shares
D) Only ordinary shares of the parent
Correct answer: B
Rationale: NCI is the equity in a subsidiary not attributable, directly or indirectly, to the parent. It
is presented within equity in the consolidated statement of financial position.
Question 8
, In a parent–subsidiary relationship, what is the purpose of preparing consolidated financial
statements?
A) To comply with tax regulations
B) To present the parent and its subsidiaries as a single economic unit
C) To calculate the parent's profit for dividend distribution
D) To determine individual subsidiary profitability
Correct answer: B
Rationale: Consolidated financial statements combine the assets, liabilities, equity, income,
expenses, and cash flows of a parent and its subsidiaries into a single set of financial
statements, presenting the group as a single economic entity.
Question 9
Which of the following describes a simple group?
A) A group formed with more than one subsidiary arranged horizontally
B) A group with only one subsidiary
C) A group with a vertical chain of subs–subsidiaries
D) A group where the parent controls sub-subsidiaries
Correct answer: B
Rationale: A simple group has a parent company with only one subsidiary (direct or indirect),
while complex groups involve multiple subsidiaries arranged in horizontal or vertical structures.
Question 10
When a parent company does not own 100% of a subsidiary, the portion of the subsidiary's
equity not owned by the parent is called:
A) Minority expense
B) Non-controlling interest (NCI)
C) Associate interest
D) Parent surplus
Correct answer: B
Financial Accounting for Groups | 150 Practice Questions with Answers
UNISA | Comprehensive Exam Preparation | Verified Solutions | Graded A+
SECTION 1: IFRS 10 – CONSOLIDATED FINANCIAL STATEMENTS & CONTROL
Questions 1–25
Question 1
IFRS 10 governs which accounting area?
A) Revenue recognition
B) Consolidated financial statements
C) Inventory valuation
D) Leases
Correct answer: B
Rationale: IFRS 10 provides guidance on the preparation of consolidated financial statements
and the concept of control. This standard establishes the principles for presenting consolidated
financial statements when an entity controls one or more other entities.
Question 2
According to IFRS 10, control exists when an investor has all of the following EXCEPT:
A) Power over the investee
B) Exposure or rights to variable returns
C) Ability to use power to affect returns
D) A majority shareholding (always required)
Correct answer: D
Rationale: Control can exist with less than 50% ownership through other means (contractual
arrangements, voting agreements, etc.). IFRS 10 defines control based on three elements:
power, exposure to variable returns, and the ability to use power to affect returns.
,Question 3
According to IFRS 10, an investor (parent) controls an investee (subsidiary) when the investor is
exposed or has rights to variable returns from its involvement with the investee and:
A) Has the ability to affect those returns through its power over the investee
B) Holds more than 50% of the investee's share capital
C) Has appointed a majority of the investee's board members
D) Has invested more than R1 million in the investee
Correct answer: A
Rationale: IFRS 10 requires all three control elements to be present: power over the investee,
exposure/variable returns, and the ability to use power to affect the investor's returns.
Question 4
A subsidiary is an entity that is:
A) Owned 100% by another entity
B) Controlled by another entity (parent)
C) Always a public company
D) Never consolidated
Correct answer: B
Rationale: A subsidiary is defined by control, not necessarily 100% ownership. Control is the
determining factor for classifying an entity as a subsidiary.
Question 5
What percentage of voting rights is normally presumed to give an investor control over an
investee under IFRS 10?
A) 20% or more
B) 25% or more
C) 33% or more
D) 50% or more
,Correct answer: D
Rationale: Under IFRS 10, an investor is presumed to have control when it holds more than
50% of the voting rights of the investee. However, control may also be demonstrated in other
ways.
Question 6
The essence of consolidations in group accounting is that:
A) The parent is able to control the policy and management of the subsidiary
B) All subsidiaries must be wound up into a single company
C) The group must be listed on a stock exchange
D) Subsidiaries are not allowed to have their own management
Correct answer: A
Rationale: The essence of consolidation is control: the parent can direct the financial and
operating policies of the subsidiary, enabling the group to be seen and managed as a single
economic unit.
Question 7
Non-controlling interest (NCI) represents:
A) The parent's share of subsidiary equity
B) The portion of subsidiary equity not attributable to the parent
C) Only preference shares
D) Only ordinary shares of the parent
Correct answer: B
Rationale: NCI is the equity in a subsidiary not attributable, directly or indirectly, to the parent. It
is presented within equity in the consolidated statement of financial position.
Question 8
, In a parent–subsidiary relationship, what is the purpose of preparing consolidated financial
statements?
A) To comply with tax regulations
B) To present the parent and its subsidiaries as a single economic unit
C) To calculate the parent's profit for dividend distribution
D) To determine individual subsidiary profitability
Correct answer: B
Rationale: Consolidated financial statements combine the assets, liabilities, equity, income,
expenses, and cash flows of a parent and its subsidiaries into a single set of financial
statements, presenting the group as a single economic entity.
Question 9
Which of the following describes a simple group?
A) A group formed with more than one subsidiary arranged horizontally
B) A group with only one subsidiary
C) A group with a vertical chain of subs–subsidiaries
D) A group where the parent controls sub-subsidiaries
Correct answer: B
Rationale: A simple group has a parent company with only one subsidiary (direct or indirect),
while complex groups involve multiple subsidiaries arranged in horizontal or vertical structures.
Question 10
When a parent company does not own 100% of a subsidiary, the portion of the subsidiary's
equity not owned by the parent is called:
A) Minority expense
B) Non-controlling interest (NCI)
C) Associate interest
D) Parent surplus
Correct answer: B
