Section 14
Section 14
Section 14
Investment in Associates
Overview
• Scope
• Definition
• Accounting Policy Election
• Cost Model
• Fair Value Model
• IFRS for SMEs’ Equity Method
• Loss of Significant Influence
• Financial Statement Presentation
• Disclosure
• Differences between IFRS for SMEs and Full IFRS
Scope
This guidance applies to the accounting for
investments in associates in both of the
following financial statements:
• Consolidated financial statements
• Individual financial statements, such as in the
financial statements of a nonparent entity,
which does not need to prepare consolidated
financial statements.
Definition
Significant
Significant
influence must Control
influence
be clearly presumed
presumed
demonstrated >50%
20-50%
<20%
Definition
• More than one entity can have significant influence
over another entity at the same time. However, only
one entity can control another at a point in time. A
substantial or majority ownership by another
investor does not preclude an investor from having
significant influence.
• Significant influence is the power to participate in
the financial and operating policy decisions of the
associate but is not control or joint control over
those policies.
Definition
• investor is usually evidenced in one or more of the
following ways (note, this is not an exhaustive list):
(a) representation on the board of directors or equivalent
governing body of the investee;
(b) participation in policy-making processes, including
participation in decisions about dividends or other
distributions;
(c) material transactions between the investor and the
investee;
(d) interchange of managerial personnel; or
(e) provision of essential technical information.
Potential Voting Rights
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Measurement