Page 248 - SBR Integrated Workbook STUDENT S18-J19

Chapter 18

(W6) Investment in associate

An associate is an entity over which the parent has significant influence.
This is typically achieved via a shareholding of between 20–50%.

It is possible to have significant influence over an entity with a holding of less than
20%. IAS 28 Investments in Associates and Joint Ventures says that the following
factors also provide evidence of significant influence:

 representation on the board of directors

 significant transactions between the investor and the investee

 the provision of technical information that is essential to the success of the
investee.

Associates are accounted for using the equity method, as follows:

$m
Cost of investment X
P’s % of associate’s post-acq reserves X
Impairment to-date (X)
––––
Investment in associate X
––––

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