IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

Wiley lFRS: Practical Implementation Guide and Workbook

206

Sundrynet assets

$6million $1million $2 million

Issued share capital of $1

Share premium Retained earnings

$3 million B had made no new issues of shares since the acquisition of the investment by A. The recoverable amount of net assets of B is deemed to be $7 million. The fair value of the net assets at the date of acqui– sition was $5 million. Required What amount should be shown in A's consolidated balance sheet at December 31, 20X7, for the invest– ment in B? Solution

1m 1.8

Investment in associate (30%x $6 miJlion) Alternativ e Calculation Cost Postacquisition profits 30%(3- 2) Negative goodwi ll (30%of $5 million) - $1million

1.0 0.3 0.5 il

The negative goodwill will be credited to income. An impairment test would prove that the carrying amount of the investment is not impaired. 1m Recoverable amount $7 millionx 30% li Carrying value of investment La (Goodwill should not be impairment tested separately but included in the carrying value of the invest– ment.) 9. DISCLOSURES 9.1 Under lAS 28 , these disclosures are mand ated : • Fair value of investment in associates for whic h there are published pri ce quotations. • Summarized financial informa tion of associates, including the agg regated amounts of ass ets, liabilities, revenues, and profit or loss. • Reason s why investments of less than 20% are accounted fo r by the equity meth od or whe n inves tments of more than 20% are not accounted for by the equity method. • The reporting date of the financial statements of an associate that is different from that of the investor and the reaso ns wh y. • Natu re and extent of any significant restri cti ons on the ability of ass ociates to tran sfer fund s to the investor in the form of cas h dividends, or rep ayment of loans or advances . • Unrecognized share of losses of an associate, both for the period and cumulative ly, if an • Summarized fin ancial informa tion of associa tes , either individually or in groups, that are not acco unted for using the equity meth od , includi ng the amounts of total assets, total liabilities, revenues, and profit or loss. • Equi ty meth od investme nt sho uld be classified as noncurren t assets. • The investor' s share of the profit or loss of equity meth od inves tments, and the ca rry ing amount of tho se investment s, mu st be separately disclosed. • The investor ' s sha re of any discontinued ope rations of such associates should be separately disclosed. • The investor's share of change s recogn ized d irectly in the associate 's equity are also recog– nized directl y in equity by the inves tor, and disclosed in the statement of changes in equity as requ ired by lAS I , Presentation of Financial Statements. 9.2 In addition, in accordance with lAS 37, these points should also be disclosed: • Investor' s share of the co ntingent liab ilities of an associate incurred jointly with other inve s– tors. • An y contingent liabilities that may arise because the investor is severally liabl e for all or part of the liabilities of the associ ate. investor has discontinu ed recognition of its share of losses of an associate . • Reason s why an ass ociate is not accounted for using the equity meth od .