A company is an associated company for another company (investor) if the investor exercises significant but no controlling influence on the associated company. The term associated company is used in accounting , especially in group accounting. The investments in and the business relationships with these companies are accounted for in the investor's consolidated financial statements using the equity method . The term "associated company" is used in particular by the International Financial Reporting Standards (IAS 28), the German commercial law regulations ( HGB) and the Austrian company code (§ 263 UGB).
Definition of the associated company
An associated company describes the quality that a company has for another company (investor). A company is therefore never an associated company on its own. The investor must have a significant but not controlling influence over the associated company. This means that a company can be an associated company of several companies (investors). The German Commercial Code and the Austrian Company Code also require the investor to hold a stake in the associated company. Companies that are included in the consolidated financial statements as joint ventures are not associated companies. Whether not fully consolidated subsidiaries and joint ventures that are not proportionately included are associated companies in the broader sense is viewed differently.
An investor has " significant influence " on another company if he has the opportunity to participate in decisions about the company's financial and business policy but cannot control this company. To make this definition more concrete, several indicators have been developed which, individually or together, are intended to indicate that there is a significant influence. Common indicators are:
- The investor has a representative in the management and / or supervisory board or a similar management body of the investee company,
- There are significant business relationships between the shareholders and the investee,
- the investor takes part in the decision-making processes of the associated company,
- management personnel are exchanged between investor and associated company,
- the investor provides the associated company with significant technical information.
In the event that an investor is entitled to at least 20% and less than 50% of the voting rights of an associated company, all accounting systems assume that the investor has a significant influence on the associated company. Depending on the accounting system, voting rights are added that are exercised through subsidiaries. In addition, certain potential voting rights are also included in accounting according to IFRS (IAS 28.8). If the investor can prove that, contrary to the assumption, he does not or cannot exercise any significant influence, he does not need to use the equity method. Even if the investor has less than 20% of the voting rights, there may be a significant influence, which can be shown by the presence of one or more of the above-mentioned indicators.
Presentation of the associated companies in the investor's consolidated financial statements
The classification of a company as an associated company has an impact on the investor's consolidated financial statements in particular . Investments in associated companies and the business relationships with these companies are generally to be accounted for using the equity method . In addition, the investments in associated companies must be shown separately in the consolidated financial statements.
In the notes to the consolidated financial statements, the investor must state the main associated companies with their names, domiciles and shareholding.
- § 263 UGB
- Küting, Weber: The consolidated financial statements, edition 11, Stuttgart 2008, p. 148f.
- See IAS 27.41b and (2) HGB