FA Chapter 25 Questions Group Accounts – Further Points
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Sir, can you explain question 5?
If omen appointed emin, then omen is controlling nah?? then it is a subsidiary nah?
No – they are not controlling because they own less than 50% of the shares.
Sir, can you please explain the statement ‘An investing company recognizes its shares of the associate’s profit or loss in profit or loss’? Is the latter ‘profit or loss’ here means SOPL. I thought the it’ll be recognized as a non-current asset, which is equal to ‘Investment at the acquisition date + the associate’s profit/loss’?
This is explained in Chapter 25 of our free lectures notes (and the free lectures working through the chapter).
Sr, can you please explain the answer to question 4? Thank you
Iamme has $500,000/$0.50 = 1M shares in issue.
Huru owns 300,000 shares, which is 30%.
This is more than 20% of the shares and so Iamme is an associate.
Sir, but it asks how we treat the investment in lamme, my first thought is to treat it like an investment placing at list of non-current assets, so I pick A. My second looking is that it will be still on non-current assets list, however it is investment in associate, so the nature gonna be “associate”, it that correct logic of thinking?
The question asks how the investment will be treated in the consolidated statements. If Huru is producing consolidated statements (because it has subsidiaries) then Lamme is treated as an associate because Huru owns more than 20%.
I wonder why everyone keeps mentioning of subsidiary with focus on consolidated statement on Q4? If a company owns one subsidiary then it cant have one another? If Huru doesn’t have any subsidiary companies, then will lamme becomes its subsidiary? I don’t think so, but I’m confused.. sir, really thanks for your patience if answer this.
Of course a company can have more than one subsidiary!
Lamme is an associate because Huru owns more than 20%. It is not a subsidiary but Huru must have a subsidiary otherwise it would not be producing consolidated statements.
Hi Sir Moffat,
Regarding to Q4, how do we know whether Huru has other subsidiaries or not?
Since it’s is not given in the question, I assume there is not. Hence I went with non-current asset option.
Thanks in advance…
The question asks how it would be treated in the consolidated financial statements. If there are consolidated financial statements then there must be subsidiaries.