Subsidiaries, associates and joint ventures held

Learning objectives

• Explain why only the cash flows between the investor and the investee (dividends, advances, investments) are reported in the statement.L2, L3
• Calculate dividends received from an associate from the equity-accounted carrying amount and the share of profit.L2, L3

Normative references

• IAS 7 §37When an investment in an associate, a joint venture or a subsidiary is accounted for using the equity or cost method, the investor restricts its reporting in the statement of cash flows to the cash flows between itself and the investee, for example dividends and advances.
• IAS 7 §38An entity that reports its interest in an associate or a joint venture using the equity method includes in its statement of cash flows the cash flows in respect of its investments in the associate or joint venture, and distributions and other payments or receipts between it and the associate or joint venture.

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

10 questions

• When an investment is accounted for using the equity method, the investor restricts its statement to cash flows between itself and the investee, such as dividends and advances.L2
• An entity that equity-accounts a joint venture need not present the advances it makes to it, as these are eliminated on consolidation.L3
• Halquine holds 30% of an equity-accounted associate. Which of these items appears in its statement?L2
• Brelmont subscribes 2 million to a capital increase of its equity-accounted joint venture and lends it 500,000. Which flows should be presented?L3
• Which of these flows does the Kelmont group present for its equity-accounted associates?L3
• Selmira's investment in an associate moves from {opening_carrying} to {closing_carrying}. Its share of profit is {share_of_profit}; no change other than dividends (case data). Compute dividends received.L2
• Corbane's investment in its joint venture moves from {opening_carrying} to {closing_carrying}. Corbane subscribed {additional_investment} in cash to a capital increase; its share of profit is {share_of_profit}. Compute dividends received and the investing outflow.L3
• Pelquine's associate made a loss: Pelquine's share is a loss of {share_of_loss}. The equity-accounted amount moves from {opening_carrying} to {closing_carrying}; only the share and dividends changed it (case data). Compute dividends received.L3
• Ostmont presents in investing a “receipt” of 180,000 equal to its share of profit in an associate that distributed nothing. What is the error?L2
• The Rozmont group lent 1.2 million to its equity-accounted joint venture; its consolidated statement does not mention it, “intragroup transactions being eliminated”. What is the error?L3