Accoutning for associates
to AASB 1016. 5.3 (b) which states that, ¡¥for equity accounting purposes, the investor must account for dividends from associates as a deduction to the investment account.¡¦
This means that regardless of whether its pre-acquisition or post-acquisition profits. They will both be credited against the investment¡¦s carrying value, and not revenue. This application of equity accounting does not clearly reflect profits from investments.
However with the method applied by Jubb:
„« Pre-acquisition profits remained treated as a reduction of the investments cost (same as all other investment accounting method)
„« But, post-acquisition profits are treated as revenue, ¡¥revenue from associates¡¦
This method not only provides a distinction between pre-acquisition and post acquisition profits but it also highlights the profits from investment as opposed to if profits were directly credited to the carrying value of the investment.