- 20 Marks
FRPA – APRIL 2024 – L3 – Q5 – Budgetary Control and IFRS 10 Consolidation
Explain budgetary control system and three ways it ensures operational efficiency; explain consolidated financial statements and four circumstances where control exists but consolidation not required.
Question
a) Budgetary Control is a crucial aspect of managing businesses finances. By implementing a robust Budgetary Control System, businesses can use their financial resources effectively and efficiently to achieve their goals and objectives.
You are required to:
i) Explain what is meant by Budgetary Control System. (3 marks) ii) Recommend three (3) ways by which Budgetary Control System can help to provide information to ensure operational efficiency. (6 marks) b) IFRS 10: Consolidated Financial Statements outlines the requirements for the preparation and presentation of Consolidated Financial Statements, requiring entities to consolidate other entities it controls. The Control Principle in IFRS 10 sets out the following three (3) elements of control: power over the investee; exposure to, or rights to, variable returns from its investment with the investee; and the ability to use power over the investee to affect the amount of those returns.
You are required to: i) Explain what Consolidated Financial Statements are (3 marks) ii) Identify four (4) circumstances under which a company may gain control over another company but would not be required to prepare Consolidated Financial Statements. (8 marks) (Total: 20 marks)
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