Where an entity prepares consolidated financial statements and has an investment in an associate, they have a choice of applying the equity method on consolidation or directly in their own books.

Question

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In consolidated financial statements, an entity must use the equity method to account for an investment in an associate, as per IAS 28 Investments in Associates and Joint Ventures. There is no choice to apply the equity method directly in their own books instead of on consolidation.

Where an Entity Prepares Consolidated Financial Statements and Has an Investment