ACF2100 Lecture Notes - Lecture 9: Equity Method, Retained Earnings, Financial Statement
23 Oct 2018
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Topic 9 equity accounting (a specific accounting method-the equity method) Associates and joint ventures (jvs) are accounted for using the equity method: an associate is an entity over which the investor has significant influence. The power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies . Application of the equity method: if the investor is not a parent (no consolidation) The equity method is applied in the investor"s books: if the investor is a parent (prepare consolidation) Cost method is used in the investor"s books. Fv acquired= fvina * investor"s proportional ownership interest. Goodwill/gain on bargain= fv acquired cost of investment. Investment in associates/jvs (acquisition of shares in investee) Share of oci of associates/jv (increase in asset revaluation surplus: 30% * ) Asset revaluation surplus: reported profit in investee. Investment in associates/jvs (share of profit: 30% * )
