ACCA Applied Knowledge · Financial Accounting · Associates
Under the equity method in consolidated financial statements, how is the group's share of an associate's profit after tax presented in the consolidated statement of profit or loss?
The group's share of the associate's profit after tax is shown as a single line in the consolidated statement of profit or loss, not combined line by line with revenue and expenses, because an associate is not controlled by the group.
- AAs a single line item, share of profit of associate, below group operating profitCorrect
- BLine by line, added to group revenue and expenses
- CAs a deduction from group retained earnings only
- DAs dividend income equal to the dividend received
Explanation
The equity method presents the investor's share of the associate's post-tax profit as a single line, not line by line (which is for subsidiaries). Dividend income is not used, as this would reflect only cash received.
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