amounts allocated to the assets and liabilities initially measured at an amount

other than cost, and then allocates the residual transaction price to the remaining
identifiable assets and liabilities based on their relative fair values at the date of acquisition.7
In its November 2017 meeting, the Interpretations Committee concluded that a
reasonable reading of the requirements in paragraph 2(b) of IFRS 3 on the acquisition
of the group results in one of the two approaches outlined above (i.e. a policy choice)
and that an entity should apply its reading of the requirements consistently to all
acquisitions of a group of assets that does not constitute a business. An entity would also
disclose the selected approach applying paragraphs 117 to 124 of IAS 1 if that disclosure
would assist users of financial statements in understanding how those transactions are
reflected in reported financial performance and financial position.
In the light of its analysis, the Interpretations Committee decided not to add this matter
to its standard-setting agenda. However, the Interpretations Committee observed that
the amendment to the definition of a business in IFRS 3 (see 3.3.1 above) is likely to
increase the population of transactions that constitute the acquisition of a group of
assets so this matter will be monitored.8
For investment properties acquired as part of the group, the first approach could mean
that a revaluation gain or loss may need to be recognised in profit or loss at the date of
acquisition of the group to account for the difference between the allocated individual
transaction price and the fair value of the investment property acquired. Using the
second approach, investment properties are recorded at fair value as at acquisition date
with no immediate impact on profit or loss at the date of the acquisition.
4.1.2 Deferred taxes wheoccurred
A.In a working paper for combined fianancial statements of home office and branch, the
branch’s net
income is included in:
a. The debit column of the branch income statement section and the credit column of the branch
statement of retained earnings section
b. The credit column of the branch income statement section and the debit column of the branch
statement of retained earnings section
c. The debit column of the branch income statement section and the credit column of the home
office statement of retained earnings section
d. Some other manner
B.A debit to the Income Summary ledger account and a credit to the Home Office account
appear in:
a. The accounting records of the home office to record the net income of the home office
b. The accounting records of the home office to record the net income of the branch
c. The accounting records of the branch to record the net income of the branch
d. Some other manner
D.The following journal entry (explanation omitted) appeared in the accounting records of the
home
office of Silversmith Company:
Investment in Seaside Branch 8,980
Operating expenses 8,980
This journal entry indicates that:
a. The branch incurred operating expenses for the benefit of the home office
b. The home office incurred operating expenses for the benefit of the branch
c. The branch paid the home office for services rendered to the branch
d. None of the foregoing occurred
C.If both the home office and the branch of a business enterprise use the periodic inventory
system,
the home office’s Shipments to Branch ledger account:
a. Is a valuation account for the home office’s Investment in Branch account
b. Always should have the same balance as the branch’s Shipments from Home Office account
c. Is a revenue account
d. Is a valuation account for the home office’s Purchases account
C.If both the home office and the branch of a business enterprise use the perpetual inventory
system, a Shipment to Branch ledger account appears in the accounting records of: a. The
home office only b. The branch only c. Both the home office and the branch d. Neither the home
office nor the branchn acquiring a ‘single asset’ entity that is not a
business
In many jurisdictions, it is usual for investment property to be bought and sold by
transferring ownership of a separate legal entity formed to hold the asset (a ‘single asset’
entity) rather than the asset itself.
When an entity acquires all of the shares of another entity that has an investment
property as its only asset (i.e. the acquisition of a ‘single asset’ entity that is not a
business) and the acquiree had recognised in its statement of financial position a
deferred tax liability arising from measuring the investment property at fair value as
allowed by IAS 40, a specific issue arises as to whether or not the acquiring entity should
recognise a deferred tax liability on initial recognition of the transaction.
This specific situation was considered by the Interpretations Committee and, in its
March 2017 meeting, it was concluded that the initial recognition exception in
paragraph 15(b) of IAS 12 applies because the transaction is not a business combination.
Accordingly, on acquisition, the acquiring entity recognises only the investment property
and not a deferred tax liability in its consolidated financial statements. The acquiring
entity therefore allocates the entire purchase price to the investment property.9
Investment