IAS 28 Associate Companies and Joint Ventures Example 1

View all free ACCA lectures >> This P2 lecture is based on OpenTuition course notes, view or download here>>

[jwplayer file=”mp4:vod/acca.opentuitioncom/p2/P2d1p3c.mp4″ streamer=”rtmp://r.acca.opentuitioncom.netdna-cdn.com/play” provider=”rtmp” image=”http://opentuition.com/acca_lectures.jpg” html5_file=”http://d.acca.opentuitioncom.netdna-cdn.com/play/_definst_/mp4:vod/acca.opentuitioncom/p2/P2d1p3c.mp4/playlist.m3u8″]


    • Profile photo of MikeLittle says

      @omerchamp, In one of your earlier posts you have written “how did 800 from alex come from”. This recent post which is now receiving my attention shows that you now apparently agree with the 800 from Alex. Does the question not say that Danute (?) has not yet recorded the dividend receivable from Alex? But does it not also show “Investment income” in Danute’s Statement of Income in the amount of 1,000. ( These are coming from me as questions because I don’t have the notes in front of me )

      I seem to remember that we only needed to adjust for one of the dividends because the other had already been recorded. Am I correct?

    • Profile photo of MikeLittle says

      @omerchamp, Is it not our share of Alex profit after tax? Or, now I think a bit more about it, isn’t it our share of the Alex dividend which we have not yet ( according to the question ) recognised? If not, post again and I’ll look at the question

  1. avatar says

    Hey I have been trying to watch these tuts but after buffering for like 4mins it starts playing then after like a minute it starts buffering again and goes to the start again and stops. Please help.

    Is anyone having a similar problem?

    • Profile photo of admin says

      I’m afraid it could be your internet connection cannot keep up with video data, make sure you do not download anything while watching lectures.. also please try at different times of the day.. maybe it will help..

  2. avatar says

    Hi Mike,

    Please can you explain why we didnt account for our share of the dividend from the JV yet we participated on the one from the Associate if we are to treat them the same?

    Also why did we Consolidate the Rev on one and not the other? Is it because we already factored in our profit share via consolidation hence taking the 1000 would have been double accounting. Am getting confused. Do we or do we not Consolidate a JV. If yes the what was the equity accounting method about am really lost here.

    Thanks Mike

    • Profile photo of MikeLittle says

      @mmariba2000, Hi

      Since the recent change, we are now no longer able to bring in the results of a jv using proportional consolidation. The only method now acceptable is the equity method – like we do for Associate companies. In neither situation do we bring the Associate nor JV dividends into the consolidated retained earnings because we have already brought in the profits out of which the dividend is to be paid.

      However …. in computing the proof ( H’s own + H’s share etc etc ) the figure for H’s own must include the dividends received from the Associate and the JV. That’s for Working 3. We omit these dividends when preparing the Consolidated Statement of Income.

      As for revenue, because now we apply equity accounting for both Associates and for JVs, we DO NOT BRING IN any revenue from these two entities. I thought that I had updated the notes to reflect that – maybe you’re using last year’s notes. In addition, I have not re-recorded the lecture, so the old lecture using the proportional method for the JV is still on the video.

      Make sure that you have the 2012 notes and, if they are incorrect based on what I have just posted, do please let me know.


      • Profile photo of rooman says

        @MikeLittle, the above recording of Danuta alex and Saulius…says the revenue and cost of sales is “one quarter of 50000 and 30000 respectively…and GP is one quarter of 20000.Whereas your above comment states its straight 20000 Gp (you said we do not take account of Associate revenue nor JV)”…which one is correct now?

      • Profile photo of rooman says

        @rooman, @MikeLittle…i guess the recording is using proportional method…i.e….holding company revenue + proportionate share of associate revenue…which is outdated…but kindly explain working 3…alex and saulis deduct dividend paid from their respective R.E…and then danuta adds dividend recievable fromalex (40% * 2000..this is written in above lecture slide….is this right?)

      • Profile photo of MikeLittle says

        @rooman, When trying to prove the retained earnings figure, “H’s own plus ……” needs to be adjusted for any dividend income not yet recorded by the investor ( Danute ) But this is only for the purposes of proving the figure – it’s highly unlikely that Graham Holt will ask that

      • Profile photo of MikeLittle says

        @rooman, Yes, the recording is using the proportional method and has not been replaced by a new recording, but my post above this explains that in my reply to mmariba

  3. avatar says

    This is best revision course available I have come across.
    Owing to time constraint and work commitment, I need your guide and sincerely wish you well prepared.

    Any body could you please help me if you will kindly send me the Mock Exam Q & A for December, 2012 P2 Exam.
    I am on long and far works assignment in China and need your instant help, expecially chat forums and reports i need to update preparing for this coming exam.

    Thankyou very much.

  4. avatar says

    Mike I have an issue or two between how you explain it and what the answer at the back of the notes shows. Although the video stopped you do still explain the figures you use and where they go but I found two differences:

    1. Saulius : Expenses use the entire 3,000 figure not apportioned in the book answer

    2. The tax is the opposite apportionment for Saulius is not included in book answer its just 5,000

    Are both methods correct, they come to the same figure but it seems to be a case of apportioning when you think you need to rather than following a set method. Both scenarios apportion on one occasion but not in the other. Please help

    • Profile photo of MikeLittle says

      @hamzahmoazzam, Have I not updated the Joint Venture lecture? I’m sorry. Thankfully it’s only a tiny part of P2 and so rarely comes up in the exam. The changes you refer to are that, when accounting for a joint venture, the investor MUST apply equity accounting – proportional consolidation is no longer an option.

  5. Profile photo of Saad Bin Aziz says

    june’s coming closer and closer, these lectures have always helped us immensely but this ias 28 issue relating to jv has terribly confused us, kindly look into it mike/admin….
    Any help in this regard would be highly appreciated!

    • Profile photo of terrygeez says

      @Saad Bin Aziz, I’m a little confused too. Does the comment from Mike way down below mean we treat Saulius like Alex i.e. a single line showing our share of the PAT of Saulius added to Danuta’s PBT in their ConSOCI? How I love acronyms.

  6. Profile photo of Saad Bin Aziz says

    Dear Mike ,
    After reading the comments below i am confused terribly as to whether this lecture is still valid? i mean are we not supposed to consolidate revenues and all? and only do it like associate accounting?
    And yes , the video blanks out after 28th min,…..

Leave a Reply