Where an acquisition in an associate results in an excess the excess is accounted for in the year of acquisition as follows:

Question

Quizplus · Accepted Answer

If an excess arises from an acquisition in an associate, it is credited to the share of associate profit account. Therefore, in this scenario, Nero Ltd would credit $10,800 (30% of the excess of $36,000) to its share of associate profit account.

Answer: D
 No adjustment is required for the asset revaluation reserve as it has been increased internally by Bianco Ltd and not as a result of the acquisition by Nero Ltd. The equity method does not require recording changes in the asset valuation reserve unless they are as a result of the associate's profits or losses.

Where an Acquisition in an Associate Results in an Excess