CAT / FIA FFA Syllabus G. Preparing Simple Consolidated Financial Statements - Definition Associate - Notes ^{1 / 2}

IAS 28 defines an associate as

An entity over which the investor has significant influence but not control or joint control and that is neither a subsidiary nor an interest in joint venture. 

Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not in control or joint control over those policies.

There are several indicators of significant influence, but the most important are usually considered to be a holding of between 20% and 50% of the voting shares and board representation.

The existence of significant influence by an investor is usually evidenced in one or more of the following ways:

• representation on the board of directors or equivalent governing body of the investee

• participation in the policy-making process

• material transactions between the investor and the investee

• interchange of managerial personnel

• provision of essential technical information