Shipments from the Home Office" account and the "Shipments to the Branch Office" account

are kept on a reciprocal basis and home office charges of mark-up on these shipments, there
will be no need to adjust the loading account at the end of the period for any realized inventory
profits. TRUE 18. If the "Shipments from the Home Office" account and the "Shipments to the
Branch Office" account are kept on a reciprocal basis and the home office charges a markup on
this shipments, accordance with IFRS 9.
7.10 Distributions received in excess of the carrying amount
When an associate or joint venture makes dividend distributions to the investor in
excess of the investor’s carrying amount it is not immediately clear how the excess
should be accounted for. A liability under IAS 37 – Provisions, Contingent Liabilities
and Contingent Assets – should only be recognised if the investor is obliged to refund
the dividend, has incurred a legal or constructive obligation or made payments on behalf
of the associate. In the absence of such obligations, it would seem appropriate that the
investor recognises the excess in net profit for the period. When the associate or joint
venture subsequently makes profits, the investor should only start recognising profits
when they exceed the excess cash distributions recognised in net profit plus any
previously unrecognised losses (see 7.9 above).
7.11 Equity transactions in an associate’s or joint venture’s financial statements
The financial statements of an associate or joint venture that are used for the purposes of
equity accounting by the investor may include items within its statement of changes in
equity that are not reflected in the profit or loss or other components of comprehensive
income, for example, dividends or other forms of distributions, issues of equity
instruments and equity-settled share-based payment transactions. Where the associate or
joint venture has subsidiaries and consolidated financial statements are prepared, those
financial statements may include the effects of changes in the parent’s (i.e. the associate’s
or joint venture’s) ownership interest and non-controlling interest in a subsidiary that did
not arise from a transaction that resulted in loss of control of that subsidiary.
Although the description of the equity method in IAS 28 requires that the investor’s
share of the profit or loss of the associate or joint venture is recognised in the investor’s
profit or loss, and the investor’s share of changes in items of other comprehensive
income of the associate or joint venture is recognised in other comprehensive income
of the investor, [IAS 28.10], no explicit reference is made to other items that the associate
or joint venture may have in its statement of changes in equity.
Therefore, the guidance in the sections that follow may be considered in determining
an appropriate accounting treatment.
7.11.1 Dividends or other forms of distributions
Although paragraph 10 of IAS 28 does not explicitly refer to dividends or other forms of
distribution that are reflected in the associate’s statement of changes in equity, it does
state that distributions received from an investee reduce the carrying amount of the
investment. Generally, the distributions received will be the equivalent of the investor’s
share of the distributions made to the owners of the associate reflected in the associate’s
statement of changes in equity. Thus, they are effectively eliminated as part of applying
the equity method.two adjustments to the loading account will be needed at the end of the
period. One adjustment will be needed to adjust the "Shipments to Branch" account down to its
cost basis, and, a second adjustment will be needed to transfer any realized inventory profits
from the loading to the "Branch Profit" account. FALSE 19. When a branch receives
merchandise a transfer prices that include a loading factor and sells that merchandise, its cost
of goods sold will be understated and its income will be overstated.