Page 359 - F1 Integrated Workbook STUDENT 2018

Associates

Definition

By definition from IAS 28 Associates

‘An associate is 'an entity over which the investor has significant influence and
which is neither a subsidiary nor a joint venture of the investor' (IAS 28, para 2)

Joint ventures are not examined at F1.

Significant influence is 'the power to participate in, but not control, the financial
and operating policy decisions of an entity. A holding of 20% or more of the
voting power is presumed to give significant influence unless it can be clearly
demonstrated that this is not the case. At the same time a holding of less than
20% is assumed not to give significant influence unless such influence can be
clearly demonstrated' (IAS 28, para 2).

IAS 28 Associates, explains that an investor probably has significant influence if:

 It is represented on the board of directors.

 It participates in policy-making processes, including decisions about dividends
or other distributions.

 There are material transactions between the investor and investee.

 There is interchange of managerial personnel.

 There is provision of essential technical information.

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