How to solve the attached problem... Please explain
4 Replies
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 24 May 2020
Can you please post the problem, download is not clear.
Rohit Agarwal
(64 Points)
Replied 03 June 2020
Accounting of associate is done using equity method
so go for it u will be able to solve it
so go for it u will be able to solve it
ACCOUNTANT
(Student)
(559 Points)
Replied 06 June 2020
My doubt is whole unrealised profit(50+60) is to be adjusted to consolidated p&l or cost of investment??
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 07 June 2020
Hi, I searched all of the resources that I have and finally understood by basic principles that cost of investment does not include unrealised profit because, assets, expenses, liabilities are not consolidated in parent books. Just group share of associate profits in P&L and Investment in associate in Balance sheet are recorded. So unrealised profits are treated like below. It does look like a ‘Holy cow’ to me because Indas 28 did not prescribe any treatment for intra groups sales and unrealised profits.
https://www.acowtancy.com/textbook/acca-fr/preparing-group-accounts/associates/notes
But I’m sure, that an associate has to treat gain from revaluations, inventory and non current assets as unrealised profits treatment as per separate financial statements and just carry the profit and cost of investment to consolidated statements. Cost of investment does not consider unrealised profits.
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