What accounting method can ASPE use for investments in associates?

Under the Accounting Standards for Private Enterprises (ASPE) in Canada, entities are permitted to choose between different methods for accounting for investments in associates. The two primary methods available are the equity method and the cost method.

The equity method allows an investor to recognize its share of the associate's profit or loss in its income statement and adjust the carrying amount of the investment accordingly. This reflects the underlying performance of the associate and provides a more dynamic view of the investment's value over time.

In contrast, the cost method allows the investor to record the investment at its historical cost and recognize income only when dividends are received or when there is a significant reduction in the carrying value of the investment. This method is more static, as it does not reflect changes in the associate's profitability or net assets in the same way the equity method does.

Given these options, the ability to choose either method provides flexibility for entities under ASPE, allowing them to select the approach that best reflects their investment strategy and the nature of their relationship with the associate. This flexibility is a key characteristic of ASPE, distinguishing it from other accounting frameworks.