IFRS PRACTICAL IMPLEMENTATION GUIDE AND WORKBOOK

206

Wiley lFRS: Practical Implementation Guide and Workbook

Sundrynet assets

$6million

Issued share capital of $1

$1million

Share premium

$2 million

Retained earnings

$3 million

B had made no new issues of shares since the acquisition of the investment by

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

Investment in associate (30%x $6 miJlion)

Alternativ e Calculation

Cost

Postacquisition profits 30%(3- 2)

Negative goodwi ll (30%of $5 million) - $1million

1.8

1.0

0.3

0.5

The negative goodwill will be credited to income.

An impairment test would prove that the carrying amount of the investment is not impaired.

Recoverable amount $7 millionx 30%

Carrying value of investment

(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

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 .

• 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.