ExpertEasy2 marksMultiple Choice
ACCA · Question 33 · Preparing simple consolidated financial statements
How is an investment in an associate accounted for in the consolidated financial statements?
How is an investment in an associate accounted for in the consolidated financial statements?
Answer options:
A.
By line-by-line consolidation of assets and liabilities
B.
Using the equity method
C.
At fair value through profit or loss only
D.
Proportionate consolidation
How to approach this question
Identify the accounting method prescribed by IAS 28 for associates.
Full Answer
B.Using the equity method✓ Correct
Under IAS 28, investments in associates (where significant influence exists) are accounted for using the equity method. The investment is initially recognized at cost and adjusted thereafter for the post-acquisition change in the investor's share of the investee's net assets.
Common mistakes
Confusing associate accounting with subsidiary consolidation.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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