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Good Morning Sir,
I am going around in circles here, trying to find the answer on the internet.
Providing an entity has an associate (which fulfils all the requirements to be classified as an associate) but the entity has no other connection with any other businesses (doesn’t have any other associates or subsidiaries and is not an associate or subsidiary of any other business), what is the correct procedure?
– does the entity need to prepare consolidated statement?
– if not, does it have to employ the equity method at all?
– it it doesn’t have to employ equity method, does it have a choice to do so?Thank you!!!
Hi,
We only prepare consolidated accounts if we have control of a subsidiary. If we have an associate then we must equity account for it.
Thanks
Hello,
I am still a bit confused about it, really sorry.
If an entity doesn’t have a sub, they are not to prepare consolidated accounts, therefore they only prepare individual accounts, is that right?
If so, IAS 27 rules for individual accounts seem to suggest that equity accounting is a choice:
When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either: [IAS 27(2011).10]
-at cost, or
– in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
-using the equity method as decribed in IAS 28 Investments in Associates and Joint Ventures. [See the amendment information below.]Hi,
Correct, if we have no subsidiary then there is no preparation of consolidated accounts.
If we have an associate where we have significant influence then we equity account for it.
Thanks
Thank you so much.
So when does the “cost” and “ifrs9” treatment that ias27 refers to is applicable?
Hello Chris,
No, IFRS9 is not in the syllabus, however I like understanding the bigger picture and not narrowly concentrate only on the syllabus,
However ias27 is in the syllabus and it is referring to IFRS9 and I just wanted to understand in which situations we account for an associate according to this.
This is the quote from IAS27:
When an entity prepares separate financial statements, investments in subsidiaries, associates, and jointly controlled entities are accounted for either: [IAS 27(2011).10]
-at cost, or
– in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments: Recognition and Measurement for entities that have not yet adopted IFRS 9), or
-using the equity method as decribed in IAS 28 Investments in Associates and Joint Ventures. [See the amendment information below.]Hi,
I appreciate that you want to broaden your understanding, and I commend you for doing so, but I’d not recommend that you do it after you’ve sat the exam and passed it. Just focus on the current syllabus and know its contents for now, which means that you need to understand how to equity account.
Thanks
Chris
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