Accounting for investment in associates by parent entities using the equity method will be done:
A) in the parent entity financial statements
B) in the consolidated financial statements
C) in either the parent entity or consolidated financial statements
D) none of the above

Question

Quizplus · Accepted Answer

The equity method requires the parent entity to account for its investment in associates in the consolidated financial statements, as the equity method records the investment at cost and subsequently increases or decreases the carrying amount to reflect the parent's share of the associate's profit or loss and other comprehensive income. This adjustment is made in the consolidated financial statements to reflect the consolidated group's overall performance. Therefore, the correct option is B, as the equity method applies only to investments in associates that are required to be consolidated. Options A and C are incorrect because the equity method is not used in the parent entity's financial statements alone. Option D is incorrect because the equity method is a valid accounting approach for parent investment in associates.

Accounting for Investment in Associates by Parent Entities Using the Equity