I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 

 

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Socket should be treated as a subsidiary on the grounds that Power is able to appoint four out of the five 

directors (criterion (d)). Assuming that the other criteria do not apply, if Power did not have such a 

power, consolidation would not be appropriate because Socket would not be a subsidiary.  

 

 

3

   Associates and trade investments 

An associate is an entity over which another entity exerts significant influence. Associates are accounted 

for in the consolidated statements of a group using the equity method.  

3.1 Investments in associates 

This type of investment is something less than a subsidiary, but more than a simple trade investment. 

The key criterion here is significant influence. This is the 'power to participate', but not to 'control' (which 

would make the investment a subsidiary). 

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Associate

. 'An entity over which the investor has significant influence'. 

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