Skip to content

ACCA Strategic Professional · Strategic Business Reporting (International) · Associates and joint arrangements

Jarvis holds 25% of Kemp and accounts for it as an associate. Kemp's financial year ends 31 December, while Jarvis's ends 31 March. Practical difficulties mean Kemp's financial statements are prepared as at 31 December. What does IAS 28 require when Jarvis applies the equity method?

Jarvis may use Kemp's 31 December statements because the gap is three months, the maximum allowed. It must adjust for the effects of significant transactions or events occurring between the two dates. Unadjusted use or abandoning the equity method would breach IAS 28.

  1. AAdjust for significant transactions between the dates, provided the gap between reporting dates is no more than three monthsCorrect
  2. BUse Kemp's 31 December statements without any adjustment
  3. CPrepare additional statements for Kemp at 31 March in all circumstances, regardless of the gap
  4. DStop using the equity method and carry the investment at cost

Explanation

IAS 28 allows the associate's statements to be at a different date only if the difference is no more than three months, and requires adjustments for significant transactions or events between the dates. Here the gap is three months, so it is permitted with adjustments. Using unadjusted statements ignores this requirement.

Did you get it right without looking?

One question tells you little. A timed set on Associates and joint arrangements shows your real accuracy, how long you take and where you lose marks.

Practise Associates and joint arrangementsFree diagnostic mock

More Associates and joint arrangements questions