Page 8 - PowerPoint Presentation

INVESTMENTS IN ASSOCIATES AND JOINT VENTURES

Equity accounting (.10 - .15 & .25 - .43)

• The equity method is an accounting method that initially
recognises the investment at cost and thereafter the

investment is adjusted for any post-acquisition changes in
the investee’s (associates) net assets (or, as net assets are

equal to equity, the equity of the investee).

• What is the starting point for equity accounting?

• 100% of Investor plus 0% of Associate

• The trial balance of the associate is NOT added to the parent as
there is no control

• What needs to be in the end point?

• Investor’s actual % share of associate’s

• The increase or decrease in equity consists of the following:

• retained earnings/(accumulated loss) since acquisition to the
beginning of the current period

• profit or loss for the current period
• gains or losses included in other comprehensive income for the

current period

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