258.docx - Week 11 Equity Method-Associate-\u9009\u62e9 \u7b80\u7b54 1 What is equity accounting(Regulated by AASB 128 1 Accounting method for investments in

258.docx - Week 11 Equity Method-Associate-u9009u62e9...

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Week 11 Equity Method-Associate- 选择 + 简答 1. What is equity accounting (Regulated by AASB 128) 1) Accounting method for investments in associates i.e. when investor has significant influence over investee. 2) Investment carrying amount reflects cost plus investor’s % of adjusted post acquisition movements in equity. 3) That is, if we have significant influence over our investment we don't eliminate and consolidate (AASB127). Instead we adjust the carrying value for our share of movements in the equity of the associate 区别于 consolidation : consolidation 要求 eliminate all, 但是 equity accounting 只对 equity 有影响 , don't eliminate and consolidate (AASB127). Instead, adjust the CA for our share of movements in the equity of the associate Objective of Equity Accounting 1)To provide useful information about performance of an investment in another entity; 2)A clever accounting technique for providing a more relevant measure than cost in the absence of control or a clear market value. Cost method is inappropriate due to :1)Revenue recognition; 2)Asset valuation. Disadvantage of EA: realization issue (not found in conceptual framework); 20% arbitrary threshold leads to manipulation (use EA or not); measurement: somewhere between FV and cost. 2. Significant influence 判断 Step 1 : Significant influence is the power to participate in the financial & operating policy decisions but is not control or joint control over those policies AASB 128 para.3; 判断标准: 1) AASB 128 suggests ≥ 20% of direct & indirect voting shares (subs) = significant influence AASB 128 para. 5 2)
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