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Hello sir,
Sir I was reading the group accounting and I want to ask one thing from the calculation of the investment in associate amount…. that why we did not add simply the share of profit of associate and why we add the share of post-acquisation profit.Plus I have another question which is that when associate sells goods to p and some unrealised profits remain so why we are not deducting it from share of post acquisition profit of associate?
Thank u in advance
I think you may need to recap our lectures on associates in FR – always cost plus % post acq profits
Associate inventory profits not really examined at this level – but I would deduct %profit from associate’s profit
Yes sir you are right but sir i am still confused about why we did not minus unrealised profit from associate’s profit to find out p’s share of profit?
Here is reference from kaplan study text illustration 3:
W1: Investment in associate:
Cost. =200000
Share of post-acquisation profit
(30%×800000×6/12). =120000
Share of excess depreciation
(30%×((1.8m-1m)/10years×6/12) = (12000)
Impairment. (50000)
Investment in associate 2058000(W2)
Share of profit of associate:
P’s share of A’s profit after tax
(30%×800000×6/12). 120000
Impairment. (50000)
Share of excess depreciation
(30%×((1.8m-1m)/10years×6/12) =
(12000)
P’s share of purp. (30000)
Share of profit of associate=
28000
Sir so my question here is that why when calculating w1 why didn’t deduct unrealised profit from 800000 profit because this profit figure have unrealised profit.
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