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Hi, Chris.
I hope you are doing well.
I am going through Tesco’s financial statements. There is this statement that was disclosed in the notes to the financial statements:“If the Group’s share of losses in a joint
venture or associate equals or exceeds its investment in the joint
venture or associate, the Group does not recognise further losses,
unless it has incurred obligations to do so or made payments on
behalf of the joint venture or associate. Dividends received from
joint ventures or associates with nil carrying value are recognised in
the Group income statement as part of the Group’s share of posttax
profits/(losses) of joint ventures and associates.”Does this mean the cap for the loss is the initial investment?
The second statement, if the investment has nil carrying value, where is the potential for the gains coming from?
I appreciate your reply. Thank you.Q1. Agree with your interpretation.
Q2. Not sure if I understand the Q. I think they are saying that, if the JV pays a dividend (which is surely unlikely), then it goes in parent’s P&L.
Trusting this is part of your ACCA studies.
🙂
Thanks, Stephen.
If the JV or associate have nil carrying value, we should not have an investment. The carrying value is nil(due to (say) continuous losses), so we have nothing showing up in our statements. Where could the source of the dividends be coming from?
I am doing this for my continuous learning. Recently, I have turned to studying the financials of real companies through capital IQ and other CFI programs. Cleared all the exams.
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