259.docx - Week 11 Accounting for Associates 1 Share of loss of associate(treatment investment decrease to 0 etc \u203a if associate makes a loss the

259.docx - Week 11 Accounting for Associates 1 Share of...

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Week 11 Accounting for Associates 1. Share of loss of associate (treatment, investment decrease to 0, etc.) › if associate makes a loss, the investment account is credited. › Limit - until carrying value of investment is zero ›A liability for associates’ losses cannot be recognised unless an investor has an obligation on behalf of an associate ›Cannot apply equity accounting again until all losses are recovered AASB 128.39 Example: A invest 100 in B to acquire 30% interest Y1: 400 loss DR share of associate’s loss 100 CR investment in associate 100 -20 loss sit in the worksheet Y2: 500 profit DR ORE 100 DR investment in associate 30 CR share of profit of associate 130 2. Explain and apply the definition of significant influence (Written Q) 1) Significant influence is the power to participate in the financial & operating policy decisions but is not control or joint control over those policies AASB128.3 2) AASB 128.5 suggests ≥ 20% of direct & indirect voting shares (subs) = significant influence 3) Need to also consider debt or equity instruments currently convertible into ordinary shares AASB 128. 7 4) Indicators of significant influence AASB 128. 6
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