ACCA Applied Knowledge · Financial Accounting · Associates
Alpha plc acquired 30% of the equity shares of Beta Ltd and has significant influence over it. In Alpha's consolidated statement of financial position, how should the investment in Beta be presented?
The investment in an associate is shown as a single line within non-current assets, using the equity method. Its assets and liabilities are not combined line by line, because the investor has significant influence but not control over the associate.
- AAs a single line in non-current assets using the equity methodCorrect
- BLine-by-line, adding 30% of Beta's assets and liabilities to the group figures
- CLine-by-line, adding 100% of Beta's assets and liabilities with a non-controlling interest
- DAs a financial asset at cost with dividends recognised as income
Explanation
An associate is accounted for using the equity method, so the investment appears as one line within non-current assets. Line-by-line consolidation applies to subsidiaries, not associates. Cost-based treatment applies only in the investor's own separate financial statements.
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