Prepared by Mosbah Majzoub, CPA1 International Accounting Standard 28 Investments in Associates

Prepared by Mosbah Majzoub, CPA2 IAS 28, Inv. in Associates I.Objectives II.Definitions III.Significant influence IV.Accounting treatment V.Inter-company items with an associate VI.Disclosure

Prepared by Mosbah Majzoub, CPA3 IAS 28, Inv. in Associates Objectives  To explain what an associate is.  To explain the accounting treatment for associates.

Prepared by Mosbah Majzoub, CPA4 IAS 28, Inv. in Associates Definitions  An associate is an entity over which an investor has significant influence.  Significant influence is the power to participate in the financial and operating policy decisions of the investee.

Prepared by Mosbah Majzoub, CPA5 IAS 28, Inv. in Associates Significant Influence  Representation on the board of directors.  Participation in policy making processes;  Material transactions between the investor and the investee.  Interchange of managerial personnel.

Prepared by Mosbah Majzoub, CPA6 IAS 28, Inv. in Associates Accounting treatment  Relationship to a group  The accounting treatment of the associate is different to that of subsidiaries.  Basic rule  An investment in an associate should be accounted for using the equity method.

Prepared by Mosbah Majzoub, CPA7 IAS 28, Inv. in Associates Accounting treatment  Equity accounting  The investment in an associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition.

Prepared by Mosbah Majzoub, CPA8 IAS 28, Inv. in Associates Accounting treatment  Recognition of losses  If an investor’s share of losses of an associate equals or exceeds its interest in the associate, the investor discontinues recognizing its share of further losses.  The interest in the associate is its value under the equity method plus any long-term interest that forms part of the investor’s net investment. Activity 1 Activity 2

Prepared by Mosbah Majzoub, CPA9 IAS 28, Inv. in Associates Disclosure  Using the equity method  Classification as non-current assets.  The investor’s share of: Profit or loss of such associates; Discontinued operations (IFRS 5); Changes recognized directly in the associate’s equity (IAS 1); and Contingent liabilities incurred through joint and several liability (IAS 37)

Prepared by Mosbah Majzoub, CPA10 Thank you for listening Any Questions ???