Associate, joint venture and the equity method

Learning objectives

• Distinguish an associate (significant influence) from a subsidiary (control) and from a joint venture (joint control, rights to the net assets).L1, L2
• Explain what the equity method consists of.L1

Normative references

• IAS 28 §3Definitions: an associate is an entity over which the investor has significant influence; significant influence is the power to participate in the investee's financial and operating policy decisions without control or joint control of those policies; a joint venture is a joint arrangement in which the parties with joint control have rights to the net assets; under the equity method the investment is first recognised at cost and then adjusted for the post-acquisition change in the investor's share of the investee's net assets; the investor's profit or loss includes its share of the investee's profit or loss, and its other comprehensive income its share of the investee's other comprehensive income.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• Significant influence is the power to participate in the financial and operating policy decisions of the investee, without control or joint control of those policies.L1
• Alba SA holds interests in three entities. In Brise SA, it has significant influence without control or joint control. In Cime SA, it shares control with another party, and both parties have rights to the net assets. In Dune SA, it has control. How is Brise SA classified for Alba?L2
• In which standard are the disclosures about the nature, risks and summarised financial information of interests in associates and joint ventures found?L3