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Associates (IAS 28) – PUPs – ACCA Financial Reporting (FR)

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  1. Example 3 – PUP
    TR owns 20% of the equity share capital of BF. During the year to 31 December 20X0 TR purchased goods with a sales value of $200,000 from BF. One half of these goods remained in inventories at the year end 31 December 20X0. BF includes a mark-up of 25% on all sales.
    Which of the following accounting adjustments would TR process in the preparation of its consolidated financial statements in relation to these goods?
    A DR Group retained earnings (W5) $20,000 CR Inventories $20,000
    B DR Share of profit of associate $20,000 CR Investment in associate $20,000
    C DR Group retained earnings (W5) $4,000 CR Inventories $4,000
    D DR Share of profit of associate $4,000 CR Investment in associate $4,000

    shouldn’t it be c since the associate is selling to the parents?

  2. Hi Sir,

    In the lecture notes, the answer to example 3 is apparently D, meaning we credit investment in associates which I don’t understand as you have said that if the Associate sells to the Parent we credit group inventory at cost.

    Please assist

  3. Example 2 – Group SFP incl. associate (I’m doing this for revision)

    The dates make no sense to me. Provided with FS’s dated as at 31/December/2020

    In the notes to the question we have 01/01/2019 (2 years before reporting date) as sub acqu date
    Also – 01/01/2014 referencing identifiable assets in Sub (6 years before reporting date)

    On 01/06/2020 (6 months before reporting date) acquired 25% associate
    Provided with details of assets as at 31/December/2019 (one year before reporting date)

    Question required we prepare consolidated statements for 31/December/2019 (1 year before reporting date)

    IS this question correct?

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