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Associate

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Associate

  • This topic has 3 replies, 3 voices, and was last updated 9 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 24, 2015 at 11:34 am #248380
    Kyaw
    Member
    • Topics: 31
    • Replies: 37
    • ☆☆

    On 1 February 20X1 Picardy acquired 35% of the equity shares of Avignon, its only associate, for $10 million in cash. The post-tax profit of Avignon for the year to 30 September 20X1 was $3 million. Profits accured evenly throughout the year. Avignon made a dividend paymentof $1 million on 1 September 20X1. At 30 September 20X1 Picardy decided that an impairment loss of $500,000 should be recognised on its investment in Avignon.
    What amount willbe shown as investment in associate in the statement of financial position of Picardy as at 30 September 20X1.

    The following is BPP calculation.
    Cost of investment………………………………………………………………………….2500
    Share of post acquisition profit ((3000 x 8/12) – 1000) x 35%………………….350
    Impairment……………………………………………………………………………………..(500)

    answer………………………………………………………………………………………….9850

    Please, explain me how to account investment in associate in individual financial statement of parent.
    ( I know how to account in consolidated statement)

    May 24, 2015 at 4:15 pm #248455
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    I can’t even understand where the top line comes from “Investment 2,500”

    The second line of the question tells me that the cost of the investment was $10 million, not $2.5 million

    As for the parent’s own records of the investment in the associate, it will remain at cost less the impairment of $500,000

    August 16, 2015 at 9:06 pm #267436
    lucie13
    Participant
    • Topics: 4
    • Replies: 12
    • ☆

    I was working on this as well today and at one point I thought my memory has deceived me! Because I only subtracted the 500k from cost. Thank goodness it feels great to prove that BPP is wrong!

    August 16, 2015 at 9:44 pm #267440
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23315
    • ☆☆☆☆☆

    Hmmm – it’s a rare occasion when any book of substance is published with no errors at all

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