IAS 28

Question 1

Associate

Answer 1

An entity over which the investor has significant influence

Question 2

Significant influence

Answer 2

The power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies

Question 3

The equity method

Answer 3

method of accounting whereby the investment is initially recognised at cost, and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets.

Question 4

Potential voting rights

Answer 4

An entity’s interest in an associate or a joint venture is determined solely on the basis of existing ownership interests

Question 5

Classification as non-current asset

Answer 5

An investment in an associate or a joint venture is generally classified as non-current asset, unless it is classified as held for sale

Question 6

Basic principle of equity method

Answer 6

In its consolidated financial statements, an investor uses the equity method of accounting for investments in associates and joint ventures.

Question 7

Exemptions from applying the equity method

Answer 7

1. the entity have been informed about, and do not object to, the investor not applying the equity method
2. the investor’s debt or equity instruments are not traded in a public market
3. the entity did not file, nor is it in the process of filing, its financial statements with a securities commission
4. the parent of the parent produces financial statements available for public use that comply with IFRSs

Question 8

Transactions with associates or joint ventures.

Answer 8

Profits and losses resulting from upstream (associate to investor, or joint venture to joint venturer) and downstream (investor to associate, or joint venturer to joint venture) transactions are eliminated to the extent of the investor’s interest in the associate or joint venture.

Question 9

Initial accounting

Answer 9

An investment is accounted for using the equity method from the date on which it becomes an associate or a joint venture.

Question 10

Application of the equity method by a non-investment entity investor to an investment entity investee

Answer 10

When applying the equity method to an associate or a joint venture, a non-investment entity investor in an investment entity may retain the fair value measurement applied by the associate or joint venture to its interests in subsidiaries.

Question 11

Losses in excess of investment

Answer 11

If an investor’s or joint venturer’s share of losses of an associate or joint venture equals or exceeds its interest in the associate or joint venture, the investor or joint venturer discontinues recognising its share of further losses.