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ACCA FR · Guided practice (Show me how)

Chapter 25: Associates (IAS 28)

Associates - the equity method in the group statements

Consider the following associates.

(a) Penny bought 30% of the equity share capital of Alex on 1 January 20X5 for $250,000. Alex's profits for the year were $170,000. An impairment review at the year end found the investment in Alex impaired by $20,000.

(b) Hartsop - draft statements of financial position at 31 December 2020 ($m):

  • On 1 January 2019 Hartsop acquired 70% of Skiddaw for $1,340m in cash. Skiddaw's identifiable net assets then had a fair value of $1,850m and its retained earnings were $450m; the excess fair value relates to property, plant and equipment with a remaining useful life of ten years. The NCI is measured at its proportionate share of the fair value of the net assets.
  • On 1 July 2020 Hartsop acquired 25% of Angletarn for $200m, giving it significant influence. Angletarn's profit for 2020 was $80m, earned evenly, and it declared a dividend of $20m on 31 December 2020. Hartsop has recorded its share of the dividend as income and a receivable.

  1. (a) Penny: the equity method

    Calculate Penny's investment in its associate Alex at 31 December 20X5.

  2. (b) Hartsop: a subsidiary and an associate

    Calculate the Hartsop group's consolidated property, plant and equipment, goodwill, investment in associate, retained earnings and non-controlling interest at 31 December 2020.

Opening this exercise…