ACCA Applied Knowledge · Financial Accounting · Associates
Which statement about the treatment of an associate in the consolidated statement of financial position is correct?
An associate appears as one line within non-current assets, measured using the equity method. It begins at cost and is adjusted for the group's share of post-acquisition profits or losses. Its individual assets and liabilities are not added line by line, which is the treatment for subsidiaries.
- AThe associate's assets and liabilities are added line by line to the group's assets and liabilities
- BThe investment is shown as a single line within non-current assets, adjusted for the group's share of post-acquisition resultsCorrect
- CThe investment is held at cost with no adjustment until it is sold
- DThe investment is shown as a current asset at fair value
Explanation
IAS 28 requires the equity method: a single line within non-current assets, starting at cost and adjusted for the investor's share of post-acquisition profits or losses and other changes. Line-by-line addition is full consolidation used for subsidiaries. Cost with no adjustment is not the equity method.
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