ACCA FR Syllabus A. The Conceptual And Regulatory Framework - Define an associate - Notes ^{10 / 10}

An associate is an entity over which the group has significant influence, but not control.

Significant influence

Significant influence is normally said to occur when you own between 20-50% of the shares in a company but is usually evidenced in one or more of the following ways:

• representation on the board of directors

• participation in the policy-making process

• material transactions between the investor and the investee

• interchange of managerial personnel; or

• provision of essential technical information

Accounting treatment

• An associate is not a group company and so is not consolidated.

• Instead it is accounted for using the equity method.

• Intercompany balances are not cancelled.