Summary 
Developments, Key Differences & History 
Compared to IFRS 
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AASB website 

• Includes associate, control, equity method, joint control, significant influence and subsidiary.
 

• Significant influence is the power to participate in the financial and operating policy decisions of an entity where that power does not give control or joint control – there is a rebuttable presumption of significant influence if the investor holds, directly and indirectly, more than 20% of the associate.
 

• Equity accounting procedures are:
• ­To initially record the investment at cost.
 

• The investment is subsequently adjusted by the investor’s share of the investee’s post acquisition change in net assets (ie profits and reserve movements after date of acquisition).
 

• The investor’s income statement reflects its share of the investee’s profit or loss for the same period.

• An investor must account for an investment in an associate using the equity method except when:
• the investment is classified as held for sale in accordance with AASB 5 Non-Current Assets Held for Sale and Discontinued Operations
 

• the exception in AASB 127 Consolidated and Separate Financial Statements that allows a parent not to present consolidated financial statements applies, or
 

• the investor is not listed and certain other conditions are also met.
• The equity method is discontinued from the date when an investor ceases to significantly influence an associate and accounts for the investment in accordance with AASB 139, provided the investment does not become a subsidiary or joint venture. The carrying amount of the investment at the date it ceases to be an associate is regarded as its cost on initial measurement.
 

• The most recent available financial statements of the associate are used to apply the equity method and the reporting dates must be consistent unless this is impracticable. If the reporting dates of the investor and associate are different, adjustments must be made for the effects of significant events or transactions that occur between the two dates (which cannot be longer than three months).
 

• If the associate uses different accounting policies from the investor, adjustments must be made to conform to the investor’s accounting policies.
 

• If an investor’s share of losses of an associate equals or exceeds its interest, the investor discontinues recognising further losses. After the investor’s interest is reduced to zero, additional losses are provided for, and a liability recognised to the extent that the investor has incurred legal or constructive obligations.
 

• After the application of the equity method, including recognising the associate’s losses as above, impairment testing is required in accordance with the requirements in AASB 139.

• The investor does not apply the equity method when presenting its separate financial report together with the consolidated financial report, but rather the investment must be accounted for:
• at cost, or
 

• in accordance with AASB 139.

• Summarised financial information of associates.
 

• Reasons why an investment is not associate if more than 20% of voting rights are held or when an investment is an associate when less than 20% of voting rights are held.
 

• Nature and extent of significant restrictions on the transfer of funds between the associate and investor.