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Group Financial Reporting - Associates and Joint Ventures, Spring 2018

Learn about associates and joint ventures in financial reporting. Understand acquisition accounting, equity accounting, significant influence, joint control, and more. Explore the accounting treatment for different levels of influence in group accounts.

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Group Financial Reporting - Associates and Joint Ventures, Spring 2018

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  1. Group Financial ReportingACF 202PART 4Associates and joint ventures Cynthia Fortin, CPA, CMA Spring 2018

  2. Introducingassociates and joint ventures So far when P controls S we use ACQUISITION ACCOUNTING whichcreates GOODWILL and NCI. If interest in an entityfalls short of control 3 situations can arise.

  3. 0 < 20% No influence Investment IFRS 9 Financial instruments: no consolidation 20<50% Significant influence AssociateEquityaccounting IAS 28 50-50% Joint control Joint venture IFRS 11 Joint arrangements Equityaccounting >50/100 Dominant influence Subsidiary Acquisition accounting Investment Associate Subsidiary 50% 0% 100% 20% Joint Venture 50%/%50%

  4. Associate An associateis an entity over which the parent has significant influence Equityaccountingrepresents the parents interest in the associate in a single line in the group statement of financial position. Significant influence isassumedwhen the parent has a holding of 20% or more of the shares but itis not a subsidiary or joint venture

  5. Joint ventures Are entitiesthat the parent controlsjointly by a contractual agreement withanother party. Joint ventures are consolidated in the group accountsusingequityaccounting. Joint control isassumedwhen the parent has 50% of the shares and another party holds the other 50%.

  6. Equityaccounting Accounting as non-currentassetinvestment in P’s books No cross casting, no NCI, no Goodwill, no sales, purchases and year-end balances eliminations. Consolidation adjustments are made for the % of post-acquisition profits, anyimpairmentloss on the investment and the % of purp. Labeled: Investment in Associate/Joint venture in group accounts

  7. Group statement of financial position Investment in the associate / joint venture, as a non-currentassetinvestment Fair value of the P’sinvestment x Plus P’s % of the post-acquisition profits x Lessimpairmentloss on the investment (x) LessP’s % of purp if P is the seller (x) x

  8. Let’s do India • Sierra

  9. References Clendon, Tom (2013), “A Student's Guide to Group Accounts, 2nd Ed.”, Kaplan Publishing UK ISBN: 9780857327642 chapters 13.

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