How should dividend income from an associate be recorded in the consolidated Statement of Profit or Loss?

Dividend income from an associate should not be recorded in the consolidated Statement of Profit or Loss under the equity method because the equity method focuses on the recognition of the investment in the associate rather than the income or dividends received. When an entity has significant influence over an associate, it accounts for the investment in the associate based on its share of the associate's profits or losses, which will impact the carrying amount of that investment.

Under the equity method, the investor recognizes its share of the associate's post-acquisition profits or losses as an increase or decrease in the carrying amount of the investment, which is reflected in the consolidated Statement of Financial Position rather than the Statement of Profit or Loss. Therefore, while dividends received can provide cash flow, they do not affect the profit or loss of the group and are instead seen as a return of capital on the investment.

This treatment aligns with the concepts of control and influence in accounting, where the underlying earnings of the associate are more relevant for financial reporting than the dividends paid out, which may not represent the performance of the investment itself.