1) IASB’s Framework said that “materiality is the entity-specific aspect of relevance”. Explain the term “materiality” as used in a Framework
2) The investment in another entity’s equity is categorized as the investment in a subsidiary, if investor can exercise control over investee.
AB obtained 4,000 of 10,000 equity voting shares and 8,000 of 10,000 non-voting preference shares of CD.
AB obtained 4,000 of the 10,000 equity voting shares of EF and had the signed agreement giving it the power to assign or remove all of the directors of EF.
Question: Describe whether CD and/or EF must be categorized as subsidiaries/a subsidiary of AB. You must refer to provisions of IFRS 10 Consolidated Financial Statements in your answer.
3) YZ purchased 100% of the equity shares in WX on 1 October 2012. YZ and WX trade with each other. In the year ended 30 September 2013 YZ sold WX inventory at the sales price of $28,000. YZ applied a mark up on cost of 331/3%. At 30 September 2013 WX still owed YZ $10,000 of the cost and had remaining in inventory $6,000 of the goods purchased from YZ.
Question: Create journal entries to make the needed adjustment in YZ’s consolidated financial statements for year ended 30 September 2013 for the above.