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how do we deal with these situations
1- we acquire a 25% in another company on 31 dec (last day of the year) and we have significant influence. do we take our share of profit 25% for the year?
2- we have a 10% interest in another company (dont have influence) and on 1 july we acquire additional 15% (total25%). At 31 dec F/Ss how to deal with this situation.
3-we had a 25% in another company and on 1 july we sold 15% so at 31 dec we have only 10% and there is no significant influenceHi
1) No, we time apportion the results of the Associate. So no impact of the Statement of Income and only the Investment in the Associate ( in this case, presumably just the cost if the investment ) to be shown in the Statement of Financial Position
2) Dividend income ( if any ) for the first 6 months. Calculate the investment in the Associate as at 1 July when we arrive at 25%. Time apportion the income from the Associate so we can show “Income from Associate” in the Statement of Income (calculated as our share of Associate’s profit after tax shown as a pre-tax item of income ). On the Statement of Financial Position we need to show Investment in Associate calculated as Cost of Investment + share of Associate’s time apportioned, adjusted post acquisition retained earnings – any impairment in the investment
3) This is the same as number 1) except in reverse. Account for it in the Statement of Income as an Associate for 6 months of pre-disposal profit after tax. It will not feature as an Associate on the Statement of Financial Position. But it will have a profit or loss on disposal calculated and the remaining investment will be valued at fair value as at date of disposal with only the dividend stream being recognised in the future financial statements
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