CAF-6 · Chapter 10 · Question 9 of 15
If an investor sells goods to its associate (downstream transaction) and some goods remain in the associate's inventory, the unrealized profit should be:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Eliminated only to the extent of the investor's interest in the associate.
Explanation
Profits and losses resulting from 'upstream' and 'downstream' transactions are recognized in the investor's financial statements only to the extent of unrelated investors' interests in the associate.
More Associates (IAS 28) MCQs
- Q11The 'Carrying Amount' of an associate at the reporting date is calculated as:
- Q12Which of the following is NOT required for the application of the equity method?
- Q13If an investment in an associate becomes a subsidiary (investor obtains control), the equity method is:
- Q14How is 'Goodwill' related to an associate handled in the financial statements?
- Q15The entire carrying amount of an investment in an associate is tested for 'Impairment' as a single asset if: