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Associates

Definitions and accounting

1.1 Definitions

 ‘An Associate is an entity over which the investor has significant
influence’ (IAS 28, para 3).

 ‘Significant influence is the power to participate in the financial and
operating policy decisions of the investee’ (IAS 28, para 3).

1.2 Impact of significant influence

 Significant influence presumed where investor holds 20-50% of ordinary share
capital of investee.

 Associate accounted for using equity accounting

1.3 Equity Accounting

 DO NOT consolidate line-by-line

 Value of investment in associate is enhanced by parent’s share of post-
acquisition reserves, recognised within group reserves

 Statement of financial position includes single-line non-current asset
‘Investment in associate’ – see standard working (W6) below

 Statement of profit or loss includes single-line ‘Share of associate profit’
shown below profit from operations

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