IAS 28 Investment in Associates

Question 1

Definition of associate

Answer 1

An entity over which investor has signifcant influence and which is neither a subsidiary nor an interest in joint venture

Question 2

Significant influence means …..

Answer 2

Power to participate in financial and operating policy decisions of the investee but is not control or joint control over those policies

Question 3

Equity method is…

Answer 3

a method of accounting whereby the investment is initially recorded at COST and adjusted thereafter for post-acquisition change in investor’s share of net assets of the investee

Question 4

Significant influence can be presumed not to exist if investor holds less than _______ of voting power

Answer 4

20%

Question 5

Existence of significant influence

Answer 5

• representation on the BOD of the investee
• participation in the policy making process
• material transactions between investor and investee
• interchange of management personnel
• provision of essential technical information

Question 6

Exemption from applying equity method

Answer 6

(1) parent exempt from preparing consolidates F/S
(2)
• parent is wholly or partially owned subsidiary of another entity
• parent’s securities are not publicly traded
• parent is not in the process of issuing securities in public securities market
• ultimate or intermediate parent publishes consolidated F/S that comply with IFRS
•

Question 7

When should the use of equity method discontinued?

Answer 7

From the date the investor ceases to have significant influence

Question 8

What should carrying amount of the investment be regarded as after ceasing to be associate?

Answer 8

CA of investment at the date of ceasing shall be regarded as its cost on initial measurement as a financial asset under IFRS 9

Question 9

If an investor issues consolidate F/S, an investment in associate should be either __________ or ______________.

Answer 9

(a) accounted for at COST

b) in accordance with IAS 39 (at fair value

Question 10

If an investor does not have subsidiaries but has an investment in associate, this should be included in F/S of investor either at _________ or __________.

Answer 10

(a) COST

b) In accordance with IFRS 9 (recognition & measurement

Question 11

Consolidated SOPL: Only group share of the associate’s ________________ is added to group profit

Answer 11

profit after tax for the year

Question 12

Consolidated SOFP:

Investment in associates should comprises of ______________z

Answer 12

cost of investment in associate 
\+
group share of post acquisition profits
-
any amounts paid as dividends
- 
any amount written off the investment