Skip to contentSkip to search
Sign inRegister

ACCA Forums

FRjune 2008 Qn 1c Associate

Ssunflowerdragon15y ago
in this qn i dont quite understand the last part of the answer.(Which is the treatment)

It will cease to be equity accounted....its carrying amt @ the dd will be its initial recognition val under FRS 39 and thereafter will be carried @ FV.
pls explain this. tks. confused.
SShunmas15y ago#1
@sunflowerdragon
Quote:
It will cease to be equity accounted….its carrying amt @ the dd will be its initial recognition val under FRS 39 and thereafter will be carried @ FV

The fact that Spekulate has acquired 60% of Acerbic’s shares gives Spekulate control over Acerbic's financial and operating policies. In other words, it has become Spekulate's subsidiary. Therefore, it would difficult for Patronic to exert significant influence over Acerbic now (significant influence is in case of an associate).

Secondly, Patronic has lost its seat on Acerbic’s board, which reinforces the same point above. Hence, investment in Acerbic will be treated under IAS 39 Financial Instruments: Recognition and Measurement.

It will not be equity accounted any more. Its carrying amount at that date will be its initial recognition value under IAS 39 and thereafter it will be carried at fair value.

HTH
Sign into reply to this topic.