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IAS 2 8 Accounting for associates recommends that associate companies be accounted for using equity accounting when consolidating. While IFRS 3 recommends that subsidiaries be

IAS 28 Accounting for associates recommends that associate companies be accounted for using equity accounting when consolidating. While IFRS 3 recommends that subsidiaries be accounted for using full consolidation
a) Explain how the two methods differ when preparing the group income statement.(3 marks)
b) Below are the statements of financial position of three entities as at 30 December 208.
\table[[,P,S,A],[Non-current assets,,,],[Property, plant and equipment,122,500,65,625,26,250],[Investments,87,500,-,-],[,,,],[Current assets,,,],[,52,500,26,250,13,125],[,,,],[Equity,,,],[Share capital (K1 ordinary shares),87,500,8,750,4,375],[Retained earnings,65,625,48,125,21,875],[,,,],[Non-current liabilities,70,000,10,938,4,375],[,,,],[Current liabilities,,,],[,,,]]
91,875,39,375
Further information:
(i)P acquired 75% of the equity share capital of S several years ago, by exchanging 7 shares in P for every one share in S. At this time the balance on S's retained earnings was K26,250.P has already made the adjustment in the share capital account
(ii)P acquired 30% of the equity share capital of A2 years ago. Paying K6,563 in cash the balance on A's retained earnings was K13,125
(iii) During the year, P sold goods to A for K8,750 at a margin of 20%. At the year-end, A still held one third of these goods in inventory.
(iv)S transferred goods to P at a transfer price of K5,250 at a mark-up of 25%. One quarter of this remained in inventory at the year end.
(v) At 31 December 20X8, it was determined that the investment in A was impaired by K308. while that of S by 5%
(vi) Non-controlling interests are valued using the fair value method. The fair value of the noncontrolling interest at the date of acquisition was K5,600.
Required:
Prepare Journal entries for notes (iii),(IV) and (V)
Prepare the consolidated statement of financial position of the P group as at 31 December 20X8.(18 mark)
B) IFRS 3 recommends that good will can either be calculated using the fair value method or the proportion of net assets method.
b) Assuming that the P group uses the net asset method to value the non controlling interest re calculate the following using the information in (b) above;
(1)Good Will
(2)Non controlling interest and
(3)Group retained earnings (9 marks)
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