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ACCA Strategic Professional · Strategic Business Reporting (International) · Group accounting including statements of cash flows

Dom owns 80% of Sub. Sub owns 30% of Assoc and has significant influence over it. Dom has no direct interest in Assoc. In Dom's consolidated financial statements, how is Assoc accounted for, and how is the share of its profit presented?

Assoc is equity accounted in Dom's group. Because Sub is consolidated, its 30% share of Assoc's profit is included in group profit, and 20% of that is then attributed to Sub's non-controlling interest. Dom's 24% effective interest affects only the split, not the amount included.

  1. AAssoc is equity accounted in the group; Sub's 30% share of Assoc's profit is included in group profit, with 20% of it attributed to NCICorrect
  2. BAssoc is not accounted for because Dom has no direct interest in it
  3. CAssoc is equity accounted using only Dom's effective 24% share, with no NCI attribution
  4. DAssoc is consolidated line by line because Sub is controlled by Dom

Explanation

Sub is consolidated, so its investment in Assoc is part of the group's investments. Under IAS 28, the group equity accounts for Assoc using Sub's 30% share, and this is reported in full in group profit. The NCI in Sub (20%) then shares in that result. Using 24% only removes the NCI share from the line, and line-by-line consolidation requires control.

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