An investment is considered an “associate company” when the investor has (or can exercise) significant influence, but not control, over the investee’s business activities. Significant influence is presumed with 20 – 50% ownership or voting power of the associate (investee). Significant influence may be evidenced by:
Joint ventures are ventures undertaken and controlled by two or more parties. IFRS identifies two characteristics of joint ventures as:
The equity method is used to account for investments in associates and joint ventures.
Equity method: It’s a one-line consolidation method.
Transactions with the investee: