Accounting On Demand 3 --- Equity Methods

1. Group’s shares of the associate’s net assets are to be calculated as follows:

Calculations:(% of share of the associate’s net assets + goodwill at NBV) = c/f value of the associate in the balance sheet.

2. For P&L (Income statement):
(A) Cost of investment & dividend income within the associate are cancelled but other inter-company items are NOT cancelled.

(B) Items to included:
1. Profits before tax(Less any goodwill amortisation)
2. Taxation.

3. Issues on Group reserves:
(A) Group’s shares of the associate’s post acquisition reserves that are calculated as normal.

(B) Cumulative amortisation of goodwill will be deducted from parent’s reserves in the group reserves calculation.