The Equity Method & Investments in Associates

An investor holds 15% of an investee, but the rest is widely dispersed among passive shareholders and the investor controls voting proxies. Equity method or fair-value investment?

What must be disclosed about investments in associates under IFRS 12?

Under the equity method, an associate earns net income and later declares a dividend to the investor. How does each event hit the investor's books?

An associate earns a strong profit but declares no dividend this year. Under the equity method, what income does the investor report, and why?

An investor owns 30% of an investee, but another party holds a controlling interest and keeps the 30% holder off the board and out of policy-making. Equity method or not?

Which factors indicate that an investor has significant influence over an investee?

After acquiring an associate, what does the investor do with the acquisition differential in subsequent periods, and how does it hit income?

An investor can appoint a director and join policy decisions at an investee but has so far stayed passive. Must it use the equity method?

How is the acquisition differential computed, and what makes it different from goodwill in an equity-method investment?

An associate keeps posting losses and the investor's investment account reaches zero. Does the investor keep booking its share of further losses?

When an equity-method investment is impaired, is the loss applied to the embedded goodwill, and can it ever be reversed?

In an equity-method investment, how is goodwill computed, and what is the figure people most often get wrong?

An FVTPL holding crosses into significant influence and must move to the equity method. Is the change applied retrospectively, and what becomes the cost base?

An investor's investment account sat at zero through several loss years. The associate turns profitable again. When may the investor start recognizing its share of profits?

An investor holds, beyond its equity, both preferred shares and a long-term note receivable in a loss-making associate. In what order are these absorbed by losses?

An investor sells inventory at a profit to its associate, and the associate still holds it at year-end. How is that profit treated under the equity method?

What defines an investment in an associate?

An investor loses significant influence and must switch from the equity method to fair value while keeping some shares. How is the retained holding measured, and where does any difference go?

Once an investment in an associate is classified as held for sale, how is it measured and where is it presented on the balance sheet?

Under ASPE, which methods may an investor use for an investment in an associate, and what disqualifies one of them?

An investor already holds 10% of a company at fair value, then buys another 20% and gains significant influence. When it switches to the equity method, over what base is the acquisition differential computed?

How is an equity-method investment tested for impairment, and what figure must fall below carrying amount to trigger a write-down?

An associate reports a loss from discontinued operations and some OCI this year. Under the equity method, can the investor simply fold its 30% share of everything into one equity-income line?

Why is the equity method sometimes called one-line consolidation, and if a parent applies it correctly to a subsidiary, how should its separate-entity net income compare to the consolidated figure?

Under the cost method, when does an investor recognize income from the investee, and what is the only event that changes the investment's carrying amount?

An associate revalues its property, plant and equipment upward and books foreign-exchange translation differences, both in its OCI. Where does the equity-method investor recognize its share of these?

An investor decides to dispose of its associate and the board has approved a sale plan, but the investment cannot be sold in its current state until a co-shareholder consent is obtained. Can it be classified as held for sale?

An investor sells half of its equity-method holding, bought in tranches at different prices. What cost basis must it use to compute the gain, and which intuitive method is prohibited?