Group Accounts - Associates and joint arrangements - F2 Flashcards
What is an associate?
An entity over which the investor has significant influence
What is significant influence?
The power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies
How are associates accounted for?
Equity accounting in accordance with IAS 28
How do we account for unrealised profits?
Remove the investor’s share of the profits
How do we account for unrealised profit in the CSFP and CSOPLOCI if the parent sells to associate?
Reduce consolidated retained earnings (Dr).
Reduce investment in associate (Cr).
Increase cost of sales
How do we account for unrealised profit in the CSFP and CSOPLOCI if the associate sells to the parent?
Reduce consolidated retained earnings (Dr).
Reduce inventory (Cr)
Reduce the ‘share of profits of associate’
What is a joint arrangement?
An arrangement of which two or more parties have joint control
What is joint control?
the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control
What is a joint venture?
joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement
How is a joint venture accounted for?
In the same way as an associate
What is a joint operation?
joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement
What is IAS 27 seperate financial statements?
outlines how parent companies should account for their investments in subsidiaries, associates and joint ventures within the individual financial statements of the parent
