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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)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
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!
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