1. Group Financial Reporting ACF 202 PART 4 Associates and joint ventures
Cynthia Fortin, CPA, CMA
FALL 2018

2. Introducing associates and joint ventures
So far when P controls S we use ACQUISITION ACCOUNTING which creates GOODWILL and NCI. If interest in an entity falls short of control 3 situations can arise.

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

4. Associate
An associate is an entity over which the parent has significant influence
Equity accounting represents the parents interest in the associate in a single line in the group statement of financial position.
Significant influence is assumed when the parent has a holding of 20% or more of the shares but it is not a subsidiary or joint venture

5. Joint ventures
Are entities that the parent controls jointly by a contractual agreement with another party.
Joint ventures are consolidated in the group accounts using equity accounting.
Joint control is assumed when the parent has 50% of the shares and another party holds the other 50%.

6. Equity accounting
Accounting as non-current asset investment 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, any impairment loss 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- current asset investment Fair value of the P’s investment x Plus P’s % of the post-acquisition profits x Less impairment loss on the investment (x) Less P’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: chapters 13.