Lecture 8 - Lecture 8 Equity accounting 1 Lecture...

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1 Lecture 8 Equity accounting
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2 Lecture references Text – Chapter 9 – this week only go up to page 515 AASB 128 Investments in Associates AASB 139 Financial Instruments: Recognition and Measurement Wesfarmers accounts
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3 Learning objectives Explain the definitions of ‘significant influence’ and ‘associate’ in AASB 128 Explain how ‘significant influence’ differs from ‘control’ Compare the equity method with the cost method and the fair value method Prepare equity journals for an associate
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4 Introduction Share investments occur along a spectrum of complexity – from simple acquisitions; to those that give significant influence over the investee; to those that control the investee – and that the accounting is different in each case. We have looked in detail at controlled investments (consolidation) Now we look at investments in which the investor has significant influence
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5 Associates Share acquisition in a company that is not enough to control the business, but enough to exert a significant influence. So is not a subsidiary, nor an interest in a joint venture (the latter is dealt with in AASB 131)
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6 The Group plus Associates Parent S1 S2 S3 A2 A1 A3 2 0 % 50% 15% 35% 75% 100% 100%
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7 Wesfarmers Look now at the reporting in the accounts What is on the Statement of Financial Performance? What is on the Statement of Financial Position? What is shown in the Notes?
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Investments in associates Key terms: Associate: investee over which the investor has significant influence Investee : entity in which another entity has an ownership interest Investor: entity/person that has an ownership interest in another entity
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Lecture 8 - Lecture 8 Equity accounting 1 Lecture...

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