Associate companies , Financial Accounting

ASSOCIATE COMPANIES (IAS 28)

An associate company is a company in which the investing company owns more than 20% but less than 50% of the voting rights.  This means that the investing company does not control or own the associate company but has a participating influence in the financial and operating activities of the associate company.

The participating influence arises because the investing company virtue of its significant voting rights can be able to appoint one or two directors in the board of directors of the associate company. These directors will take part in the decision making process.

As the investing company doesn’t control the associate company, associate company are therefore NOT consolidated. However, due to the participating influence, they cannot be treated as mere investments and thus IAS 28 requires the use of equity method of accounting.

In summary, the equity method of accounting requires that the investment in associate company should initially be carried in the accounts at cost and thereafter the amount increased with the investing company’s share of post-acquisition retained profits in the associate company.

Posted Date: 12/12/2012 5:12:59 AM | Location : United States







Related Discussions:- Associate companies , Assignment Help, Ask Question on Associate companies , Get Answer, Expert's Help, Associate companies Discussions

Write discussion on Associate companies
Your posts are moderated
Related Questions
i need help with my project

Potential advantages to BNM Narrative reporting will enable BNM to provide information about social, economic and environmental policies. Many users are influenced by an entit

Would you invest in a project that has a net investment of $14,600 and a single net cash flow of $24,900 in 5 years, if your required rate of return was 12 percent?

XYZ Corporation recieves $100,000 from investors for issuing them shares of its stock. XYZ's journal entry to record this transaction would include a a debit to investment b credit


Q. Explain about Material event? Subsequent Event - Material event which takes place after the end of accounting period and before the publication of an entity's FINANCIAL STAT

Arnot International's bonds have a present market price of $1,250. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may

Q. What is Leveraged Lease? Leveraged Lease - Transaction under which LESSOR borrows funds to acquire property which is leased to a third party. Property and lease rentals are


A of surat consigns goods to B of jaipur to be sold at or above invoice price.B is entitled to get a commission of 8% on sales at invoice price plus 25% of any surplus price reali