(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009Section 14Investments in AssociatesScope of this section14.1 This section applies to accounting for associates in consolidated financialstatements and in the financial statements of an investor that is not a parent butthat has an investment in one or more associates. Paragraph 9.26 establishes therequirements for accounting for associates in separate financial statements.Associates defined14.2 An associate is an entity, including an unincorporated entity such as apartnership, over which the investor has significant influence and that is neithera subsidiary nor an interest in a joint venture.14.3 Significant influence is the power to participate in the financial and operatingpolicy decisions of the associate but is not control or joint control over thosepolicies.(a)(b)(c)If an investor holds, directly or indirectly (eg through subsidiaries),20 per cent or more of the voting power of the associate, it is presumed thatthe investor has significant influence, unless it can be clearlydemonstrated that this is not the case.Conversely, if the investor holds, directly or indirectly (eg throughsubsidiaries), less than 20 per cent of the voting power of the associate, it ispresumed that the investor does not have significant influence, unless suchinfluence can be clearly demonstrated.A substantial or majority ownership by another investor does not precludean investor from having significant influence.Measurement—accounting policy election14.4 An investor shall account for all of its investments in associates using one of thefollowing:(a) the cost model in paragraph 14.5.(b) the equity method in paragraph 14.8.(c) the fair value model in paragraph 14.9.Cost model14.5 An investor shall measure its investments in associates, other than those forwhich there is a published price quotation (see paragraph 14.7) at cost less anyaccumulated impairment losses recognised in accordance with Section 27Impairment of Assets.© IASCF 81