ANSWER :-
Distinguish investments in
Associates and Joint Arrangements ;-
- Investments in Associates
:- Refers to the investment in an entity in which
the investor has significant influence but does not have full
control like a parent and a subsidiary relationship. Usually, the
investor has significant influence when it has 20% to 50% of shares
of another entity.
- Joint Arrangements:- A
joint arrangement is an arrangement over which two or more parties
have joint control. Joint control is defined as the contractually
agreed sharing of control and exists only when decisions about the
relevant activities require the unanimous consent of the parties
sharing control.
Accounting Methods Required
:-
- For Investments in
Associates: Equity
method is a method of accounting whereby the
investment is initially recognised at cost and adjusted thereafter
for the post-acquisition change in the investor’s share of the
investee’s net assets. The investor’s profit or loss includes its
share of the investee’s profit or loss and the investor’s other
comprehensive income includes its share of the investee’s other
comprehensive income.
- Joint Arrangements:-
Equity Method
using A joint venturer accounts for its interest in the joint
venture.
The relevant
AASB(Australian Accounting Standard Board)
for:-
- Investments in
Associates:- AASB 128
for Investment for Associates
- Joint Arrangements:-
AASB 11 for Joint
Arrangements.