• Profile photo of John Moffat says

      An associate is where one company has significant influence over another – usually where they own between 25% and 50% of the shares.
      It is only relevant if the company owing the shares is already producing consolidated accounts because they also have a subsidiary.

  1. avatar says

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  2. avatar says

    HI there ,
    I am not sure if 100% correct but i think i have some answers for these questions

    Q:1 I believe you are saying that for example company A has 51% shares in company B, then company B will have remaining 49% shares which will make it a subsidiary.

    Q:2 even if company A has less than 50% shares in company B , if it has more than 50% voting rights than it will be the parent cause all the financial n operational decisions of B will be in “control” of A
    ( one more to add is that ordinary shares carry voting rights so , if 50% ordinary shares then 50% voting rights, but the condition you are stating can also exist )

    Q:3 share premium comes from share capital because when we record share capital we also record the corresponding share premium for the same number of shares so , if a company owns 51% of ordinary shares then it will own the same percentage of share premium . Now if we calculate it as
    51%*100K +51%*50K= 76.5K which is 51% of 150K

    I am not sure if these will help you , but if they do then I am glad .

  3. Profile photo of nzeadall says

    Thank you very much Open Tuition team, very nice lecture, however I have 3 questions, I’ll be very grateful if someone could help me on them:

    Question 1: We know that an associate have between 20% – 50% of shares and for more than 50%, it is a subsidiary. But then how shall we differentiate between a parent and subsidiary if for eg company A has invested 51% of shares. ( by definition it could be both a parent and a subsidiary, right?)

    Question 2: We are aware a company can control even if it has less than 50% voting rights as long as the mentioned conditions (pg 165) are met. Suppose in a question where the conditions are not mentioned but it says a company owns less than 50% of share capital, but more than 50% of voting rights, does it still have control as parent?

    Question 3: If ordinary share is $100K and share premium is $50K, a company owns 51% of ordinary share and only 5% of prem share, the overall ownership is less than 50% of the total capital amount (51% * 100K + 5% * 50K) = $53500 out of $150K, does it still control as parent?

    Thank you

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