Accounting for associates and joint arrangements

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

SIGNIFICANT INFLUENCE in normally between 20% to 50%

An ASSOCIATE is NOT a group company so is NOT CONSOLIDATED. Therefore it is accounted for using the EQUITY METHOD. Inter company balances NOT CANCELLED.

ACCOUNTING TREATMENT

Statement of Financial Position
                      
INVESTMENT IN ASSOCIATE
(Cost + Share of A's Post Acq'n reserve - Impairment )

Consolidated Income Statement

Share of ASSOCIATES
(Profit after Tex less Impairment )

INCLUDE share of PAT less an impairment for that year in associate

DIVIDEND received from Associate will NOT BE INCLUDED