ACCA Applied Knowledge · Financial Accounting · Associates
Which of the following is a correct statement about how an associate is presented in the consolidated statement of profit or loss of the investing group?
The investor's share of the associate's profit after tax is presented as a single line item in the consolidated statement of profit or loss. Associates are equity accounted, so their revenue and costs are not added line by line as they are for subsidiaries.
- AThe investor's share of the associate's profit after tax is shown as a single line itemCorrect
- BThe associate's revenue and costs are added line by line to the group figures
- COnly dividends received from the associate are shown as investment income
- DThe associate's profit is shown only if the holding exceeds 50%
Explanation
Under the equity method the group shows its share of the associate's profit after tax as one line, below group profit from operations. Line-by-line addition applies to subsidiaries. Showing only dividends is the treatment for a simple investment, and 50% is the test for control, not for associates.
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