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Distributions received from the investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be required arising from changes in the investee’s other comprehensive income that have not been included in profit or loss (for example, revaluations). [IAS 28.11]
Could you please explain why dividend received from an associate reduce the carrying amount of the investment in the associate.
Could you please also explain or give an example for changes in OCI that would reduce the carrying amount
Many thanks
The carrying amount basically represents parent’s share of associate’s net assets – if the associate pays a dividend it will have less money – so my share of net assets goes down
A revaluation downwards would decrease parent’s share of net assets (so there’s an OCI example.
This will come clearer when you practice cash flow workings.
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