IAS 28 - Investment in Associates

Question 1

Definition of IAS 28 Associate + 5 markers

Answer 1

An associate is an entity over which the investor has significant influence.

• Representation on the board
• Participation in policy making
• Material transactions between investor and investee.
• Interchange of managerial position
• Provision of essential technical info.

Question 2

Equity Accounting

Answer 2

• Consolidate accounts only required if Parent has at least one Sub
  -Associates are accounted for using equity accounting.
• Remove the NCA in Parent
• Calculate investment in associate
  w6 - Cost of investment x
  P’s % in Associate post acq profits x
• P’s Impairment (x)
• P’s % of PUP (X)
• Bring in P% of post acq profits to SFP via w5

P&L
- Remove dividends received by parent
- P’s % of Associate profit for the year
TIME APPORTIONMENT
-Impairment (x)
P’s % of PUP (X)

Question 3

Disposals

Answer 3

Proceeds X
Carrying Amount of Investment (x)

=Gain/Loss on investment

Consolidation

Sales proceeds x
Net Assets as at disposal x
Net Goodwill as at disposal x
NCI as at disposal (x)

=Gain/loss on disposal