Page 30 - Finac2 Test 1 Slides - 1. Consolidated And Separate Financial Statements

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.

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