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Associated companies

SASayeda Amal1mo ago
For relieving group losses we had to multiply 100% of Z plc's shareholding in A and Further multiplied it by 80% shareholding of A in B. So this became one group structure because it was within 75%. Whereas C couldn't be within this group. It could only be a subsidiary of B. Do we have to do the same for finding out associated companies? Because in one of the explanation related to a question it was written "Associated companies are those companies that are under the control of Telephone Ltd (i.e. Telephone Ltd owns, either directly or indirectly, more than 50% of the company's ordinary share capital)" In Chapter 16, when we were doing associated companies, we did a structure of associated companies. In that A / \ 80% of B 70% of C | 70% of D But the associated companies were 4 Because the sub-subsidiary was 75% part of the Subsidiary company C. So indirectly there were included too. But do we have to do 70%*70%? Or we can just assume that it's an associate too? Thank you.
Llucy23Tutor1mo ago#1
For associated companies, you do not multiply through the shareholdings to find the 'effective interest'. Associated companies are determined by control only (> 50%). So if X owns 51% of Y, which in turn owns 51% of Z, X's effective interest in Z (51% x 51% = 26.01%) is irrelevant. Z is controlled by Y which in turn is controlled by X. X tells Y to do something, and Y has to obey, even if it's something to do with Z, so X directly controls Y and indirectly controls Z.
SASayeda Amal1mo ago#2
Okay. That cleared everything.?
SASayeda Amal1mo ago#3
Okay. That cleared everything.
Llucy23Tutor1mo ago#4
Good!
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