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FAR > 16. Consol: Associates and Joint Arrangements > Flashcards

16. Consol: Associates and Joint Arrangements Flashcards

1
Q

Consol: Associates: Definition

A

‘Significant influence’

20%-50% shareholding

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2
Q

Consol: Joint Arrangements: Definition

A

Contractual arrangement specifying joint control

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3
Q

Consol: Joint Arrangements: 2 types

A
  1. Joint operations
  2. Joint ventures
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4
Q

Consol: Associates and Joint Arrangements: Accounting treatment type

A

Equity accounting

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5
Q

Consol: Joint Arrangements: What type is any JA that isn’t structured though a separate entity?

A

Joint Operation

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6
Q

Consol: Joint Arrangements: Are accounts usually prepared for joint arrangements?

A

No

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7
Q

Should a party to a joint operation recognise its share of the assets, liabilities, income and expenses of the JO?

A

Yes

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8
Q

Consol: Joint Arrangements: Joint venture: Definition

A

Separate legal entity

Maintains own FS
(Own assets, expenses etc.)

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9
Q

Consol: Joint Arrangements: How should each venturer with joint control account for their share of the joint venture?

A

Recognize their share in their consol

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10
Q

Consol: Joint Arrangements: Equity accounting: Basic principle

A

No addition of assets/liabilities
(of the associate)
(as parent doesn’t have control)

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11
Q

Consol: Joint Arrangements: Equity accounting: How is the associate treated?

A

Non-current asset investment

(As a single line)

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12
Q

Consol: Joint Arrangements: Equity accounting: ‘Investment in associate’ line in the accounts calculation

A
  1. Original cost of the investment

PLUS

  1. P’s % of A’s post-acquisition movement in NAs

MINUS

  1. Impairments to date
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13
Q

Consol: Joint Arrangements: Equity accounting: ‘Investment in associate’ line calculation: Two things included in NA movement line?

A
  1. Post-acquisition profits

MINUS

  1. Dividends paid by A
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14
Q

Consol: Joint Arrangements: Adding to consol: Optional W2A working?

A

Net assets of associate:

Share capital and retained earnings at RD, Acq & RE PA

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15
Q

Consol: Joint Arrangements: Adding to consol: W5: Additional lines

A
  1. P% of A’s post-acquisition RE mov
  2. LESS Associate impairment to date
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16
Q

Consol: Joint Arrangements: W6

A

Other group reserves:

100% P’s reserve

PLUS

P% of S’s PA reserve mov

PLUS

P% of A’s PA reserve mov

17
Q

Consol: Joint Arrangements: W7

A

Investment in associate:

Original cost of investment

PLUS

P% A’s PA NA mov (W2A)

LESS

Impairment losses to date

18
Q

Consol: Joint Arrangements: Adjustment when FV of the A’s NAs exceed the carrying amount?

A

Additional depn charged on the effective uplift

So subsequently deducted from the investment in the associate in the SFP

Extra line:

Less P% of FV depn

19
Q

Consol: Joint Arrangements: P&L

A

No 100% addition of income & expenses

(Because no control)

20
Q

Consol: Joint Arrangements: P&L: Do you include dividends from the associate

A

No

INSTEAD, INCLUDE:

group share of the associate’s profit for the year less any impairment for the year

21
Q

Consol: Joint Arrangements: CSPL: Extra line for the Associate consol

A

Share of profit of associate

22
Q

Consol: Joint Arrangements: CSPL: Share of profit of associate line: Calculation

A
  1. A% A’s profit

MINUS

  1. A% A’s FV depn

MINUS

  1. Impairment of A
23
Q

Consol: Joint Arrangements: Treatment: intra-company balances between group companies and the associate in the CSFP

A

Remain

24
Q

Consol: Joint Arrangements: Treatment: intra-company sales/purchases between group companies and associate in CSPL

A

Remain

(Not eliminated)

25
Q

Consol: Joint Arrangements: Treatment: Unrealized profit in inventory

A

Adjusted:

  1. Calculate PURP as with subs
  2. Multiply by P%
26
Q

Consol: Joint Arrangements: DE: Unrealized profit in inventory: P selling to A

A

CSFP:
DR Group RE
CR Investment with A

CSPL:
Add P’s share of unrealized profit to COS

27
Q

Consol: Joint Arrangements: DE: Unrealized profit in inventory: A selling to P

A

CSFP:
DR group RE
CR Group inventory

CSPL:
Deduct P’s share of unrealized profit from ‘share of profit of associate’

28
Q

Consol: Joint Arrangements: Treatment: Divs paid by the associate

A

Remove divs paid from associate to the parent (W2)
(Same as for subs)

29
Q

Consol: Joint Arrangements: UK GAAP difference

A

Goodwill:

Amort over 10y like subs
Even though no separate figure

So additional working required

30
Q

Consol: Joint Arrangements: UK GAAP goodwill extra calc

A
  1. Consideration paid

MINUS

  1. P% NA at acq

= GW at acq

  1. amort/impair to date (W5)

FAR (19 decks)

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