Subsidiaries, Joint ventures and Associates

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IFRS 10  defines a subsidiary as “An entity that is controlled by another entity.”

Subsidiary is an entity which is controlled by another entity. The control means that the parent company can govern the financial and operating policies of its subsidiaries to gain benefits from the operations of subsidiary. Control can be gained if more than 50% of the voting rights are acquired by the parent. This is usually done by purchasing more than 50% of the shares of subsidiary. An investor controls an investee if and only if the investor has all the following:

(a) power over the investee;

(b) exposure, or rights, to variable returns from its involvement with the investee; and

(c) the ability to use its power over the investee to affect the amount of the investor’s returns.

Joint Ventures

International Accounting Standard 28 (IAS 28) defines a joint venture as “A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.”

A joint arrangement is an arrangement of which two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

Joint arrangement can exist in two different forms as set out by IFRS 11:

  • joint operation
  • joint venture


International Accounting Standard 28 (IAS 28) defines an associate as “An associate is an entity over which the investor has significant influence.”

Significant influence means the power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. Significant influence is usually acquired by purchasing more than 20% of voting power but less than 50%. 

Quote Waseem Khan, 19 March, 2015
Kindly note that :
- International Accounting Standard has been replaced by the new standard :
"International Financial Reporting Standard 10 ( IFRS 10)"

- Joint venture is now dealt by

IAS 28.
IIAS 28 — Investments in Associates and Joint Ventures (2011).and

IFRS 11.
IFRS 11 — Joint Arrangements - IAS Plus

Contact me in Case of any Query.

Best Regards,

Waseem Khan

Quote Vit. A., 19 March, 2015
Thank you, corrected!
Quote Guest, 18 November, 2015
Thank you very much... ......
Quote Guest, 1 March, 2016
Thank you
Quote Guest, 15 March, 2017
When two companies (company A and company B) have 50% interest each (company A has 50% interest and company B has 50% interest) in an investee entity? Is this capital joint venture or associate?
Quote Guest, 29 November, 2017
Can anyone please give an example of what financial and operating policies are?
Quote Guest, 27 December, 2017
what is the role and the goal of associates?
Quote Guest, 21 October, 2019
if it is 50%...fall which under category?

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