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

Determine the basis of the ultimate cost of the payment, Given information:...

Given information: Offered a $20 million commercial loan priced using a 3month LIBOR index+100bp. After some preliminary research, using a money center bank's swap trading desk

Calculate the optimal allocation of stocks, A) Suppose you have two stocks ...

A) Suppose you have two stocks (A and B) in your portfolio, worth $400,000 and $600,000 respectively. The annual volatility is 0.30 and 0.35 respectively. The correlation between t

Purpose of a budget, 1.   Briefly explain what is "utility". Briefly explai...

1.   Briefly explain what is "utility". Briefly explain which is worth more, a dollar today or a dollar in the future (in your explanation be sure and explain "why")? How does infl

State the relationship between return and risk, State the relationship betw...

State the relationship between return and risk This relationship between return and risk has significant implications for setting financial objectives for a business. Owners wil

Application for grant-executorship laws and acccounts, APPLICATION FOR GRAN...

APPLICATION FOR GRANT 1) An application for a grant of representation ("representation" means the probate of a will or the grant of letters of administration) is made in such a

Determine the payback period for the project, An investment project require...

An investment project requires a net investment of $100,000. The project is expected to generate annual net cash inflows of $28,000 for the next 5 years. The firm's cost of capital

Current market cost of debt, The cost of debt must be based upon the curren...

The cost of debt must be based upon the current market cost of debt. Where different kinds of debt are used estimates of more than one debt cost may be necessary and these costs we

Break-even ebit, Break-Even EBIT: Rolston Corporation is comparing two ...

Break-Even EBIT: Rolston Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, Rolston would have 1

Causes of failure of legacies and gifts of residue, CAUSES OF FAILURE OF LE...

CAUSES OF FAILURE OF LEGACIES AND GIFTS OF RESIDUE 1) Ademption : If property which has been specifically bequeathed does not belong to the testator at the time of his death,

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