CERTYNEX IFRS ACADEMY

Alba SA has reduced its interest in Brise, an associate, to zero. Alba has neither a legal or constructive obligation towards Brise nor made any payment on its behalf. A colleague recognises a liability of 90,000 for Alba's share of the additional losses for the year. What is the error?

The liability should have been recognised, but for an amount limited to the nominal value of the interest Alba holds in Brise.

The liability should have been replaced by an impairment of the investment, already nil, which would bring its carrying amount below zero.

The liability is correct, but the debit should have been recorded in equity rather than in profit or loss, the loss being the associate's and not Alba's.

With no legal or constructive obligation and no payment on behalf of the associate, no liability is recognised for additional losses.