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