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INVESTMENTS IN ASSOCIATES AND JOINT VENTURES
Comprehensive example - calcs
COMMENT
• The investor sold inventory to the associate (downstream
transaction). The investor thus made the unrealised profit in P/L and
the unrealised profit is included in the inventory of the associate.
• The unrealised profit thus has to be eliminated against revenue and
cost of sales of the parent, as well as the investment in associate
(SFP) account.
• The share of profit of associate (P/L) is thus not affected.
• Should the associate sell to the investor, then the unrealised profit
will affect the share of profit of associate (P/L).
• Also note that the total sales and cost of sales of R62 000 related to
the intragroup sales for the year are not eliminated when an
associate is involved, as only unrealised profit is eliminated (IAS
28.28).
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