Chapter 13

Question 1

What is an associate?

Answer 1

An entity over which the investor has significant influence

Question 2

How are associates accounted for?

Answer 2

Equity accounting

Question 3

Are unrealised profits eliminated on consolidation?

Answer 3

Yes as the group takes a share of transaction

Question 4

According to IAS 28 when would an investor have significant influence?

Answer 4

Represented on board of directors
Participates in policy making processes
Material transactions between investor and investee
Interchange of managerial personnel
Provision of essential technical information

Question 5

How do we calculate the associates PUP adjustment?

Answer 5

P% x profit in inventory

Question 6

How do we account if parent sells to associate?

Answer 6

Reduce consolidated retained earnings (DR)
Reduce Investment in associate (CR)

Question 7

How do we account if associate sells to parent?

Answer 7

Reduce consolidated retained earning (DR)
Reduce Inventory (CR)

Question 8

What is joint control?

Answer 8

Contractually agreed sharing of control of an arrangement, which exists only when decisions about relevant activities require unanimous consent of parties control

Question 9

What is a joint venture?

Answer 9

Joint arrangement whereby the parties have joint control of the arrangement have rights to the net assets of the arrangement

Question 10

What is joint arrangement?

Answer 10

Arrangement of which two or more parties have joint control

Question 11

What is a joint operation?

Answer 11

Joint arrangement whereby parties have joint control of the arrangement have right to the assets and obligations for the liabilities, relating to the arrangement