Question

Entity a is a first-time adopter of ifrs and has decided to prepare separate financial statements in accordance with ias 27. Entity a has elected to measure its investments in subsidiaries at cost. Which of the following is not one of the amounts at which entity a can measure these investments in its separate opening ifrs statement of financial position?

1) Fair value
2) Cost
3) Equity method
4) Net realizable value

Answer 1

Entity A, as a first-time adopter of IFRS, has decided to prepare separate financial statements in accordance with IAS 27.

Step-by-step explanation:

In the context of International Financial Reporting Standards (IFRS) and the preparation of separate financial statements under IAS 27, if Entity A has elected to measure its investments in subsidiaries at cost, the option "Equity method" is not one of the amounts at which Entity A can measure these investments in its separate opening IFRS statement of financial position.

The available options for measuring investments in the separate financial statements are usually:

Cost: This is the amount originally paid for the investment.

Fair Value: The current market value of the investment.

Net Realizable Value: This is more relevant to assets that will be sold rather than investments in subsidiaries.

Equity Method: This involves recognizing the investee's post-acquisition profits or losses in the investor's statement of profit or loss and other comprehensive income.

Since Entity A has elected to measure its investments at cost, the equity method, which involves recognizing post-acquisition profits or losses, would not be used for measuring these investments in the separate opening IFRS statement of financial position.