CERTYNEX IFRS ACADEMY

Alba SA acquires an interest in Brise SA, an associate, for 1,500,000. A colleague records the investment at 1,200,000, i.e. its share of the carrying amount of Brise's equity. What is the error?

It should have recorded the investment at fair value at the next reporting date, with no reference to the cost paid on acquiring the interest.

It should have recorded the investment at cost, 1,500,000; the equity method starts from cost and is then adjusted for the investor's share.

It is right on the amount, but it should have taken the difference of 300,000 to expense in the period of acquisition of the interest.

It should have recorded 1,200,000 for the net assets and presented separately a goodwill of 300,000, amortised over its useful life.