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The rule is that the group share of pat is included in the consolidated income statement.
On 1 January 20X6 the net tangible assets of A Co amount to $220,000, financed by 100,000 $1 ordinary shares and revenue reserves of $120,000. P Co, a company with subsidiaries, acquires 30,000 of the shares in A Co for $75,000. During the year ended 31 December 20X6 A Co’s profit after tax is $30,000, from which dividends of $12,000 are paid.
Show how P Co’s investment in A Co would appear in the consolidated statement of financial position at 31 December 20X6.My question is why was dividend deducted first before calculating the group share or we must deduct dividend first if the information is given? or do we only do this for the statement of fin position? but the income statement is as above
In the consolidated statement of financial position, the investment in the associate is calculated as:
Cost of investment +
Share of post-acquisition RETAINED –
Any impairment in the value of the investment
(This is all clearly written out in course notes
It’s all clearly illustrated in the worked examples in “Revision lectures” (towards the foot of the F7 home page))
For the sake of the consolidated statement of profit or loss, the group’s share is calculated on the associate’s profit after tax (and before dividend) for this year
OK?
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