Financial Accounting · Associates

Associate in the Consolidated Statement of Profit or Loss

Updated 11 October 2026 · Fact-checked

An associate is not consolidated line by line. In the consolidated statement of profit or loss you show one line, 'share of profit of associate', equal to the group's percentage of the associate's profit after tax. It sits after group operating profit and finance costs, before group tax. Adjust it for any unrealised profit.

Understand Associate in the Consolidated Statement of Profit or Loss

A subsidiary is controlled by the parent. So the group adds 100% of its income and expenses, line by line, and then shows the non-controlling interest share.

An associate is different. The investor has significant influence (usually a holding of 20% to 50% of the voting power) but not control. The group cannot direct the associate's activities, so it does not add the associate's revenue or costs to its own.

Instead the group uses the equity method. It reports its share of the associate's results as a single line. The share is based on the associate's profit after tax, because tax is already deducted. This means you take the group percentage of the associate's profit after tax, not of revenue or profit before tax.

The line is placed in the consolidated statement of profit or loss after finance costs and before group profit before tax. Group tax therefore includes only the parent and subsidiaries' tax, not the associate's tax, because the share of profit is already after tax.

In the exam you may also need to include only the part of the year that the investment was an associate, or deduct unrealised profit on trading between the group and the associate. Dividends received from the associate are not income in the group statement. They are already reflected in the share of profit.

Key formulas to remember

Share of profit of associate: Group % × associate's profit after tax for the year; Shown as one line. Use profit after tax, and time-apportion if the holding was acquired part-way through the year.
Adjusted share where unrealised profit exists: Group % × associate's profit after tax − group share of unrealised profit (where the associate sold goods to the group); The adjustment for associate sales is usually made against the share of profit line and against inventory in the statement of financial position. Check the question wording.
Position in the statement: Group operating profit − finance costs + share of profit of associate = group profit before tax; Group tax is then deducted. No associate revenue, costs or tax are added line by line.
Dividend from associate: Dividend received from associate = not included in group profit; Remove it from the parent's investment income to avoid counting the profit twice.
Significant influence: Holding usually 20% to 50% of voting power; This is a presumption, not an absolute rule. Other evidence of influence matters.

How to solve Associate in the Consolidated Statement of Profit or Loss questions

Use this order for any question asking for the consolidated statement of profit or loss with an associate.

1Confirm the investment is an associate (significant influence, usually 20% to 50%) and not a subsidiary.
2Consolidate the parent and any subsidiaries line by line from revenue down to operating profit, removing intragroup items.
3Remove any dividend income from the associate that the parent has recorded in its own profit or loss.
4Take the associate's profit after tax for the year. Time-apportion it if the holding was bought during the year.
5Multiply by the group percentage to get the share of profit of associate.
6Deduct the group share of any unrealised profit on sales by the associate to the group, if the question gives one.
7Present the share as one line after finance costs and before profit before tax. Do not add associate revenue or costs.
8Deduct group tax (parent and subsidiaries only) to reach profit for the year, then check the non-controlling interest split if there is a subsidiary.

Quickest way: One-line associate shortcut

When to use it: Use in a multiple-choice or number-entry question that asks only for the share of profit of associate or for group profit before tax.

Find the associate's profit after tax. Ignore its revenue and costs.
Multiply by the percentage held, adjusted for the months held if needed.
Subtract the group share of any unrealised profit given.
Add the result to group profit before tax from the parent and subsidiaries. Do not touch group tax.

Common mistakes in Associate in the Consolidated Statement of Profit or Loss

Adding the associate's revenue and expenses line by line.
Students treat the associate like a subsidiary because the parent owns a large stake.
Fix: Ask if there is control. If not, use one line only: share of profit of associate.
Using profit before tax instead of profit after tax.
The question lists several profit figures and students pick the wrong one.
Fix: Always take profit after tax for the associate. Its tax is already inside the line.
Leaving the dividend from the associate in group profit.
The parent's own figures include investment income and it is easy to overlook.
Fix: Remove the dividend from the parent's income. The share of profit replaces it.
Not time-apportioning when the holding was acquired part-way through the year.
Students use the full-year profit automatically.
Fix: Include only the profit for the months the investment was an associate, then apply the percentage.
Putting the share of profit after group tax.
Students think the line is a separate profit after tax item.
Fix: Place it before group profit before tax. Then deduct group tax, which excludes the associate's tax.
Showing a non-controlling interest share for the associate.
Students confuse the associate with a subsidiary that has other shareholders.
Fix: Non-controlling interest relates only to subsidiaries. The associate line is already only the group's share.

Worked examples

Example 1

Parent P owns 40% of A, bought several years ago. For the year, A's revenue is $900,000, profit before tax is $150,000 and tax is $30,000. P's operating profit (including a $12,000 dividend from A) is $400,000, and P has no subsidiaries and no finance costs. Group tax is $90,000. Calculate group profit for the year.

Show the solution

A is an associate (40% holding), so use the equity method.
A's profit after tax = $150,000 − $30,000 = $120,000.
Share of profit of associate = 40% × $120,000 = $48,000.
Remove the dividend from P's profit: $400,000 − $12,000 = $388,000.
Group profit before tax = $388,000 + $48,000 = $436,000.
Group tax = $90,000, so profit for the year = $436,000 − $90,000 = $346,000.

Answer: Share of profit of associate is $48,000 and group profit for the year is $346,000.

Example 2

On 1 April, P bought 30% of B, gaining significant influence. P's year end is 31 December. B's profit after tax for the full year is $200,000. During the nine months after acquisition, B sold goods to P. P still holds some of them, and the unrealised profit in them is $10,000. Calculate the share of profit of associate to show in the consolidated statement of profit or loss.

Show the solution

Time-apportion: 9 months from 1 April to 31 December, so profit = $200,000 × 9/12 = $150,000.
Group share = 30% × $150,000 = $45,000.
Group share of unrealised profit = 30% × $10,000 = $3,000.
Adjusted share of profit = $45,000 − $3,000 = $42,000.

Answer: The consolidated statement of profit or loss shows share of profit of associate of $42,000.

Exam tips

Look for the words significant influence or a holding between 20% and 50%. They signal one-line treatment.
In multiple-choice questions, check whether the options use profit before tax. The correct one uses profit after tax.
Read for acquisition dates. A mid-year purchase means time-apportion before applying the percentage.
In multi-task questions, build the statement in order: group operating profit, finance costs, share of associate, tax. This keeps the line in the right place.
If a number-entry answer needs unrealised profit, multiply it by the group percentage before deducting.

Practice questions from Associates

Associate in the Consolidated Statement of Profit or Loss in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Associate in the Consolidated Statement of Profit or Loss: frequently asked questions

How do I show an associate in the consolidated statement of profit or loss?

Show one line called share of profit of associate. It equals the group percentage of the associate's profit after tax. Place it after finance costs and before group profit before tax.

What is the difference between consolidating a subsidiary and an associate in profit or loss?

A subsidiary's income and expenses are added line by line at 100%, with a non-controlling interest share. An associate appears as one line for the group's share of its profit after tax. No revenue or costs of the associate are added.

Do I include the dividend received from an associate in group profit?

No. The dividend is not group income under the equity method. The share of profit already captures the group's interest in the associate's earnings, so remove the dividend from the parent's income.

Is the associate's tax included in group tax?

No. The share of profit is based on profit after tax, so the associate's tax is already deducted. Group tax covers only the parent and its subsidiaries.