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Hi,
In the written elements of a question on Colnsolidated Statement Of FInancial Position how can you tell if the company is a subisidiary or an associate. I understand the theory behind it but when it says the company X (parent) has acquired this many shares of company Y for value of YY and company X has acquired this many shares of company Z for value of ZZ – how do you know which is which. I know the subisidary rule is around 20% and associate is more than that normally.
I don’t know if this makes sense – but could anyone advise please.
Thanks
Simply apply theory – if the acquired company fits rules for subsidiary company (in general not 20% of shares, but 50%! With additional rules of having power, inter-entity transactions etc) or the acquired company fits rules for associate (from 20% to 50% with additional rules).
Check the theory according distinguishing subsidiaries and associates.
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This is a follow up question: Is the percentage computation based on number of shares or value of shares.
with associates the issue is significant control and have 20-50% of equity shares the parent can own less than 20% there can also represent the board of directors e.g 2 out of 5 directors now the trick is control 4 out of 6 directors which is exercised by control so is a subsidiary there r other conditions go to the acca website under technical article consolidated f stat which was updated today there it explains in detail about associates u will get a clearer picture let me know
Hi,
Thank you all for responding – it has been helpful. Thanks
Gobah – it is based on acquiring say 800,000 shares of company S and 200,000 shares of comapany A.
Tayiba1 – i have tried to look for the article on acca website but cannot find it – please could you send the link.
Many thanks
Sairah
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