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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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