Answers / Group Accounting
Group Accounting & IFRS Interview Questions
Consolidation, IFRS 15/16, deferred tax, and purchase price allocation — technical accounting under pressure.
69 questions · model answers · common mistakes
Consolidation Methods
- Explain capital consolidation under IFRS 3.
- How do you account for a step acquisition where control is achieved?
- How do you handle a mid-year change in consolidation scope (acquisition or disposal)?
- How do you account for non-controlling interests (NCI)?
- When is proportionate consolidation used?
- Walk me through the mechanics of a step acquisition, including increases after control is obtained.
- What is the difference between the full and partial goodwill methods?
- Walk me through the complete first-time consolidation of a new subsidiary.
- When a parent sells a controlling interest in a subsidiary but retains a non-controlling interest, how is the transaction accounted for under IFRS 10?
- What is the difference between the full-goodwill and partial-goodwill methods under IFRS 3, and which is more commonly used?
- What is the difference between full goodwill and partial goodwill methods under IFRS 3? Which one is more commonly used and why?
- When a subsidiary is acquired mid-year, how do you allocate the subsidiary's profit between pre- and post-acquisition periods? What practical issues arise with interim dividends?
- How would you account for the disposal of a subsidiary with a significant amount of goodwill, where the disposal results in a loss of control but the parent retains a non-controlling interest (NCI), and what are the implications for the group's financial statements?
- Describe a scenario where a step acquisition results in a gain from a bargain purchase. How would you account for this gain under IFRS 3, and what are the implications for the group's financial statements?
- When performing a purchase price allocation (PPA) for a subsidiary acquisition, you identify an in-process R&D project that has no alternative use. Under IFRS, how is it measured, and what is the subsequent accounting?
- What are measurement-period adjustments under IFRS 3, and how do they differ from post-acquisition errors or estimate changes?
- How do you account for a written put option held by non-controlling shareholders over their NCI?
- What is a deemed disposal, and how is it accounted for when a subsidiary issues new shares to third parties?
- Can a parent consolidate an entity it owns less than 50% of? Explain de facto control under IFRS 10.
IFRS Standards
- How does currency translation work under IAS 21 for a foreign subsidiary?
- What is the difference between a provision and a contingent liability under IAS 37?
- Explain segment reporting under IFRS 8.
- What is the difference between functional and presentation currency, and how do you determine functional currency?
- How does hedge accounting appear in group consolidation?
- How do you account for a subsidiary in a hyperinflationary economy (IAS 29)?
- What are the main challenges in an HGB-to-IFRS transition?
- What is IFRS 18 and why should group accountants care?
- What are management-defined performance measures (MPMs) under IFRS 18?
- What is the difference between the current-rate method and the temporal method for translating foreign operations, and when is each used?
- How do you calculate the deferred tax impact of a fair value uplift on inventory in a business combination? What happens when the inventory is subsequently sold?
- What are the key considerations when reconciling local GAAP reporting packages to IFRS for consolidation purposes, particularly in regards to differences in accounting policies and estimates between local GAAP and IFRS?
- What are the implications for group accounting when a subsidiary operates in a hyperinflationary economy, as defined by IAS 29, and how would you restate the subsidiary's financial statements before consolidation?
- When reconciling a local GAAP reporting package to IFRS for consolidation, you find that the subsidiary uses the LIFO method for inventory, which is not allowed under IFRS. How would you adjust this, and what is the deferred tax impact?
- How is negative goodwill (a bargain purchase) accounted for under IFRS 3, and what should you do before recognizing the gain?
- How do you determine a subsidiary's functional currency under IAS 21, and why does it matter more than the presentation currency?
- When a foreign subsidiary has goodwill from its acquisition, how is that goodwill translated, and where do the FX differences go?
- What is a reverse acquisition, and how does the accounting differ from the legal form?
Group Reporting Process
- Which SAP transactions are core to group accounting, and what do you use them for?
- Walk me through a typical group month-end close process.
- How do you ensure data quality in the group reporting package?
- What consolidation systems are used, and how do they differ?
- How do you handle a newly acquired entity in the first consolidation?
- How do you handle late submissions from subsidiaries in the group close?
- How does materiality work in group accounting?
- How do you prepare for the group audit?
- What are the key controls in the consolidation process?
- What is the difference between SAP BPC and SAP Group Reporting?
- How would you design a group reporting package?
- What is the practical treatment of intragroup dividends in consolidation when the subsidiary has NCI? How does it affect NCI and retained earnings?
- How do you reconcile local GAAP reporting packages to IFRS for consolidation? Give an example of a common adjustment (e.g., property revaluation under local GAAP vs cost model under IFRS).
- What are the key steps in designing a reporting package for group consolidation, and how would you ensure that the package meets the needs of both the group's management and external stakeholders?
Intercompany Transactions
- How do you investigate and resolve an intercompany difference?
- How do you account for an intercompany loan?
- What tools and approach do you use for intercompany reconciliation?
- How does transfer pricing interact with group accounting and intercompany elimination?
- What is the difference between elimination entries and adjustment entries in consolidation?
- How does eliminating unrealized profit differ for upstream versus downstream transactions, and what's the NCI impact?
- What is the correct accounting treatment for an intercompany sale of inventory where the inventory is still held by the buying entity at year-end, and how does it affect non-controlling interest (NCI) if the seller is a subsidiary with NCI?
- When consolidating a subsidiary, how do you account for an intercompany sale of a non-current asset (e.g., equipment) that is still held by the buyer at year-end? Walk through the elimination entries and the impact on the group's depreciation.
- How would you handle the accounting for an intragroup dividend, particularly when the dividend is paid by a subsidiary with non-controlling interest (NCI), and what are the implications for the group's financial statements?
- How do you account for an intragroup dividend when the subsidiary has non-controlling interest (NCI)? Walk through the elimination entry and the impact on NCI and retained earnings.
Valuation & Impairment
- How do you determine the discount rate (WACC) for an IAS 36 impairment test?
- What is a Cash Generating Unit (CGU) and why does it matter for impairment?
- Walk through a complete PPA.
- How do you calculate deferred tax on consolidation adjustments? Give an example with a fair value uplift on inventory.
- How do you account for the deferred tax on a fair-value uplift to PP&E in a business combination, and how does it affect goodwill and the group's effective tax rate over time?
- What approach would you take to allocate goodwill to cash-generating units (CGUs) in a goodwill impairment test when the CGUs are highly interconnected, and how would you determine the recoverable amount of each CGU considering these interconnections?
- How would you determine the recoverable amount of a cash-generating unit (CGU) that includes significant corporate assets, and what considerations should be given to the valuation of these corporate assets in the context of a goodwill impairment test?
- Explain how you would allocate goodwill to cash-generating units (CGUs) in a goodwill impairment test when the CGUs are highly interconnected. What considerations should be given to the valuation of corporate assets in this context?
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