Page 29 - Topic 1 - 1. Consolidated & Separate Financial Statement

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Accounting for investments

• Two main kinds of investments in the shares of another

entity are distinguished, namely:

• simple share investments; and

• significant share investments which give the investor entity an

influence over or control of the affairs of the investee entity

• When accounting for significant share investments, it is

necessary to determine:

• the degree of influence exercised by the investor over the investee's

financial and operating policies as this determines the appropriate
accounting method.

• It is also essential to determine the ownership interest as this
determines the degree to which the investor shares in the equity of

the investee.

29