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Associate accounting

Posted: 27 May 2021, 10:31
by sam
Hi,

I want to confirm accounting entries for disposal of associate in full. ( assume at the day 1 of the year)

In standalone FS,

Loss on disposal of associate ..........Debit
Investment in associate - Cost ........Credit

In Conso FS,

No impact.

Thanks for the help :)

Re: Associate accounting

Posted: 27 May 2021, 11:09
by JRSB
Why no impact in consol?

Re: Associate accounting

Posted: 27 May 2021, 11:31
by DJP
and why loss on disposal of associate? is it being sold for nothing?

Re: Associate accounting

Posted: 27 May 2021, 13:12
by sam
Yes sold for nothing because the amount is not big enough.
Secondly, impact on consol is nothing except for the entry passed for disposal in standalone FS.

Please confirm ! thanks

Re: Associate accounting

Posted: 27 May 2021, 19:56
by Marek Muc
You've probably applied equity method in consolidated financial statements, so the carrying amount of associate is different than in separate financial statements

Re: Associate accounting

Posted: 30 May 2021, 14:45
by sam
Yes you are right. I didn't notice the difference between two amounts. :)

I am doing consolidation in Excel and every time i am passing adjustment entry in conso books to record share of profit of associate:

For current year effect,

Investment in associate XXX
Share of associate profit for the year XXX
Share of revaluation reserve for the year XXX

For prior year effect,

Investment in associate XXX
Retained earning XXX
Revaluation reserve XXX


So this time i will not pass these adjustments and associate will be de-recognized in conso FS also.

Please confirm? thanks

Re: Associate accounting

Posted: 30 May 2021, 17:23
by Marek Muc
You will pass this conso adjustment for the period up to the day of disposal, and then derecognise the investment at carrying amount under the equity method. Be careful not to recognise the expense representing the carrying amount of investment twice (depending on your consolidation mechanics some expense can be carried over from separate accounts of the investor)

Re: Associate accounting

Posted: 31 May 2021, 15:15
by sam
thanks :)