Uniform accounting policies

Learning objectives

• Explain that the associate's financial statements are adjusted to the investor's accounting policies before the equity method is applied.L2, L3
• Determine the adjustment when the associate applies a different policy (for example, the cost model or the fair value model for investment property).L3

Normative references

• IAS 28 §35The entity's financial statements are prepared using uniform accounting policies for like transactions and events in similar circumstances.
• IAS 28 §36Except as described in para. 36A (an entity that is not itself an investment entity may retain the fair value measurement applied by an associate or joint venture that is an investment entity to its interests in subsidiaries), when the investee uses accounting policies other than those of the entity for like transactions and events, its financial statements are adjusted to conform to the entity's accounting policies before they are used in applying the equity method.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• For the equity method, the associate's financial statements are prepared using uniform accounting policies for like transactions and events in similar circumstances.L2
• Alba SA applies to its investment property an accounting policy different from that of Brise SA, its associate, for similar assets (case data). Write a short note stating how to treat this difference before applying the equity method, distinguishing case facts, rule and professional judgement.L3