Associates - CSOFP

Question 1

How does IAS 28 recognise significant influence?

Answer 1

Shareholding of between 20% and 50%.
Representation on the Board
Policy making participation
Material transactions between associates
Interchange of managers
Provision of essential technical information

Question 2

How do we account for Associates?

Answer 2

W1 Group Structure
Include Parent % of Associate

W2 Net Assets of Sub
W3 Goodwill
W4 NCI

W5 GRE
Include Parent % of Associate Post-acq profits

W6 Investment in Associate

Cost of investment in A
Add post acquisition reserves (W5)
Less impairment of associates goodwill (x)
= x —-> Non-current assets of the group CSOFP

Question 3

How is PUP accounted for in Associates?

Answer 3

Groups share of associate only, therefore calculation is:

Unsold inventory x mark-up/100 + mark-up x GROUP SHARE

DOWNSTREAM
Dr GRE W5
Cr Investment in Associate W6

UPSTREAM
Dr GRE W5
Cr Group Inventory

Question 4

What is the pro-forma for Associates in a Consolidated P/L?

Answer 4

Sales Revenue (100% of P and S, less IC sales)
Cost of Sales (100% of P and S, less IC purchases, plus PUP)
= Gross Profit

Admin Expenses (100% of P and S)
Distribution Costs (100% of P and S)
= Profit from Operations

Share of Profits of associates (x% of Associates PAT) - impairment of associates goodwill
Investment Income (External only)
Interest Payable (100% of P and S)
= Profit before tax

Taxation (100% P and S)
= Profit for the year

Other Comprehensive Income
Revaluation Gains
= Total Comprehensive Income

Amount Attributable to:
Equity holders of the parent
NCI (W4)