Which of the following is the criterion for treatment of an investment as an associate?

An associate is an entity in which an investor has significant influence over the investee.
Which TWO of the following indicate the presence of significant influence?

How should an associate be accounted for in the consolidated statement of comprehensive income?

Ansar Limited has held a 90% subsidiary, Fine Limited, for many years, and 3 months before the
year end, acquired a 40% associate, Ishaq Limited.
Their turnover figures for the year were:
Rs. million
Ansar Limited 360
Fine Limited 270
Ishaq Limited 180
Calculate the turnover figure to appear in the consolidated statement of comprehensive income for
the group.

Which of the following methods is used when accounting for an associate

Naima Limited owns 70% of Faiza Limited and 30% of Farhan Limited. The tax charge for each
company for the year is Naima Limited Rs. 80 million Faiza Limited Rs. 64 million and Farhan
Limited Rs. 48 million respectively.
What should be shown as the tax charge in the consolidated statement of comprehensive income?

IAS 28 defines significant influence in relation to associates as:

Best Limited has a 60% subsidiary Better Limited and a 40% associate Good Limited.
The three companies have profits after tax of Rs. 150 million each.
Calculate the profit after tax for the period that will be shown in the consolidated statement of
comprehensive income.

Idrees Limited has an 80% subsidiary, Sajjad Limited and a 40% associate, Sehrish Limited.
The three companies have revenue of Rs. 120 million each.
What should be shown as the revenue figure in the consolidated statement of comprehensive
income?

Which of the following investments should be accounted for by Shah Zain Limited as associates?
1. 18% of the equity capital of Company A. Shah Zain Limited is the largest shareholder in this
company, has a director on its board, and provides management expertise.
2. 23% of the equity share capital of Company B. Shah Zain Limited has no representative on the
board and takes no part in the management of Company B The majority shareholders in
Company B have historically used their combined voting rights to keep any nominee of Shah
Zain Limited off the board.
3. 50% of the equity share capital of Company C. The remaining 50% is held by an unrelated
company. Policy decisions relating to Company C must be agreed to by both of its shareholders.
4. 46% of the equity share capital of Company D. The other shareholdings are split between
various small investors. Shah Zain Limited nominates eight of the ten directors on the board of
Company D, under a written agreement between the two companies.

Fahad Limited bought 30% of Mahad Limited on 1 July 2014. Mahad Limited’s statement of
comprehensive income for the year shows a profit of Rs. 400 million. Mahad Limited paid a dividend
to Fahad Limited of Rs. 50 million on 1 December 2014. At the year-end, the investment in Fahad
Limited was judged to have been impaired by Rs. 10 million.
What will be the share of profit from associate shown in the consolidated statement of profit or loss
for the year ended 31 December 2014?

Bahadur Limited bought 30% of Shahzor Limited on 1 January 2018, when Shahzor Limited had
share capital of 10 million Rs. 10 shares and Rs. 400 million retained earnings. The consideration
comprised one Bahadur Limited share for every 3 shares bought in Shahzor Limited.
At the date of acquisition, Bahadur Limited’s shares had a market value of Rs. 40.50 and Shahzor
Limited’s had a market value of Rs. 20. At 31 December 2018, Shahzor Limited’s net assets were
Rs. 460 million.
What is the value of an investment in associate shown in the consolidated statement of financial
position as at 31 December 2018?

Falcon Limited acquired 30% of Eagle Limited on 1 July 2013 at a cost of Rs. 5.5 million. Falcon
Limited has classified Eagle Limited as an associate.
For the year ended 30 September 2013, Eagle Limited has reported a net profit of Rs. 625,000.
What is the value of the associate investment in the group statement of financial position as at 30
September 2013?

Reliance Group acquired 24,000 of Alia Limited’s 80,000 equity shares for Rs. 60 per share on 1
April 2014. Alia Limited’s profit after tax for the year ended 30 September 2014 was Rs. 400,000.
On the assumption that Alia Limited is an associate of Reliance Group, what would be the carrying
amount of the investment in Alia Limited in the consolidated statement of financial position of
Reliance Group as at 30 September 2014?

An associate is an entity over which the investor has significant influence’.
Which TWO of the following do not indicate the presence of significant influence?

Yooshay Limited owns 30% of Hussain Limited, which is purchased on 1 May 2017 for Rs. 2.5
million. At that date Hussain Limited had retained earnings of Rs. 5.3 million. At the year-end date
of 31 October, 2017 Hussain Limited had retained earnings of Rs. 6.4 million after paying out a
dividend of Rs. 1 million. On 30 September 2017 Yooshay Limited sold Rs. 700,000 of goods to
Hussain Limited, on which it made 30% profit.
Hussain Limited had resold none of these goods by 31 October.
At what amount will Yooshay Limited record its investment in Hussain Limited in its consolidated
statement of financial position on 31 October 2017?

On 1 February 2011 Saima Limited acquired 35% of the equity shares of Anum Limited, its only
associate, for Rs. 10 million in cash. The post-tax profit of Anum Limited for the year to 30
September 2011 was Rs. 3 million.
Profits accrued evenly throughout the year. Anum Limited made a dividend payment of Rs. 1 million
on 1 September 2011. At 30 September 2011 Saima Limited decided that an impairment loss of Rs.
500,000 should be recognised on its investment in Anum Limited.
What amount will be shown as ‘investment in associate’ in the statement of financial position of
Saima Limited as at 30 September 2011?

Zarqoon Limited owns 30% of Emerald Limited and exercises significant influence over it. Emerald
Limited sold goods to Zarqoon Limited for Rs. 160,000. Emerald Limited applies a one third mark
up on cost. Zarqoon Limited still had 25% of these goods in inventory at the year end.
What amount should be deducted from consolidated retained earnings in respect of this
transaction?

On 1 October 2018 Usuf Limited acquired 3 million of Abdullah Limited’s 10 million shares in
exchange for 7.5 million of its own shares. The stock market value of Usuf Limited’s shares at the
date of this share exchange was Rs. 16 each.
Abdullah Limited’s profit is subject to seasonal variation. Its profit for the year ended 31 March 2019
was Rs. 100 million. Rs. 20 million of this profit was made from 1 April 2018 to 30 September 2018.
Usuf Limited has one subsidiary and no other investments apart from Abdullah Limited.
What amount will be shown as ‘investment in associate’ in the consolidated statement of financial
position of Usuf Limited as at 31 March 2019?

Shazim Limited owns 30% of Shazil Limited. During the year to 31 December, 2014 Shazil Limited
sold Rs. 2 million of goods to Shazim Limited, of which 40% were still held in inventory by Shazim
Limited at the year-end. Shazil Limited applies a mark-up of 25% on all goods sold.
What is the amount of adjustment for the removal of unrealized profit from inventory?