Associates & Joint Ventures
45 min read • Last updated January 2026
Not every investment in another company leads to control. When you have significant influence or joint control, you don't consolidate line-by-line. Instead, you use the Equity Method.
1Significant Influence & Joint Control
Associates (IAS 28)
The power to participate in financial and operating policy decisions, but not control.
- • Usually 20% to 50% voting rights
- • Representation on the board
- • Participation in policy-making
- • Material transactions between entities
Joint Ventures (IFRS 11)
Contractually agreed sharing of control. Decisions require unanimous consent of the parties sharing control.
- • Joint Control is the key
- • Parties have rights to the net assets of the arrangement
- • Accounted for using the Equity Method (same as associates)
2The Equity Method Principles
The equity method is often called "one-line consolidation." Instead of adding assets and liabilities, you show your investment as a single line item in the SOFP.
The Standard Formula:
Crucial Distinction: In consolidation, dividends from a sub are eliminated in full. In the equity method, dividends from an associate reduce the carrying amount of the investment — they are not recognized as income in the group P/L.
3The "Investment in Associate" Working
Just like the AOE for subsidiaries, you need a structured working for associates. Use these two columns:
| Working Item | Since Acq (Pre-CY) | Current Year |
|---|---|---|
| Associate's Profit | X | X |
| Less: Unrealised Profits (Group Share) | (X) | (X) |
| Adjusted Profit | Total | Total |
| Group Share (x%) | Split | Split |
4Unrealised Profits with Associates
When the group sells to an associate (downstream) or vice versa (upstream), only the group's share of the profit is eliminated.
Example: Downstream Sale
Parent sells inventory to Associate for R10,000 profit. Parent owns 30% of Associate. Associate still holds the stock at year-end.
Profit to eliminate = R10,000 x 30% = R3,000
Dr Group Retained Earnings / COS
Cr Investment in Associate
Key Takeaways
- Associate = Significant influence (usually 20-50%).
- JV = Joint control + rights to net assets.
- Equity Method: One line in SOFP, one line in P/L.
- Dividends reduce the asset; they aren't income.
Coming in Part 7...
We'll wrap up the series with Group Financial Statements. You'll see how everything pulls together into the Group SOFP, SOCI, and SOCIE, with final exam tips for the big day.