Associate companies , Financial Accounting

Assignment Help:

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.


Related Discussions:- Associate companies

Need answer, Suppose a company will issue new 25-year debt with a par value...

Suppose a company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%. If the flotation cost is 3% of the issue proce

What are the advantage of limited liability, What are the Advantage of limi...

What are the Advantage of limited liability Advantage of limited liability, though, imposes certain obligations on such companies. To start up a limited company, documents of i

Create multiple portfolios standard and poor mid cap, In this project you w...

In this project you will use your many skills to create multiple portfolios, using the Standard and Poor's Mid Cap 400 as your dataset. First, construct an index fund using a st

Present value of an uneven series, In actual life cash flows occurring abov...

In actual life cash flows occurring above a period of time are frequently uneven. For illustration, the dividends declared through the companies will change from year to year, as s

Auditing., assess the risk of material misstatement at assertion level

assess the risk of material misstatement at assertion level

Abatement of legacies-executorship laws and accounts, ABATEMENT OF LEGACIES...

ABATEMENT OF LEGACIES (a) If the assets, after the payment of debts, necessary expenses and specific legacies, are not sufficient to pay all the general legacies in full, the l

The opening entries-executorship laws and accounts, The opening entries 1...

The opening entries 1. Assets of the estate or trust In both cases the various assets of the estate or trust are debited to appropriate accounts and credited to the Estate Ca

Treatment of cash flow - gaap & fasb, The appropriate treatment of Cash flo...

The appropriate treatment of Cash flow in respect of the following items as per US GAAP & FASB - (230-10)  1. Receipt of Insurance settlement proceeds of $2 mill. From an intern

Prepare journal entry to record the accrued biweekly payroll, Stark Company...

Stark Company has five employees. Employees paid by the hour receive a $10 per hour pay rate for the regular 40-hour work week plus one and one-half times the hourly rate for each

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd