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What is the difference between associated company and subsidiary company?

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Question added by Kumaran Veeraseku Subburaman , Assistant Manager Accounts , Larsen & Toubro
Date Posted: 2015/07/22
Madhav Aryal
by Madhav Aryal , Articleship in chartered account , Auditing

As per the IAS 24 an associate is the person who has the significant influence over reporting entity (say 20 to 50 percent control). As per IFRS 10 subsidiary is the person who controls at least 51 percent or more.

Badar Khan
by Badar Khan , Accounts cum administrative assistant , Al Qassimia Drivng Training Centre.Sharjah

In accordance with IAS28 INVESTMENT IN ASSOCIATE an associate is An entity, including an unincorporated entity such as a partnership, over which aninvestor has significant influence and which is neither a subsidiary nor an interest in a joint venture.An entity has significant influence when they own more than20% shares in an entity but less than50%.

In accordance with IFRS10 a Subsidiary is an entity controlled by another entity

Kishore Kumar Revelli
by Kishore Kumar Revelli , Manager , Hitachi Consulting Software Services India Pvt Ltd

A company owned or controlled by another company with51% stake is called Subsidiary

Associate Company is a company in which another company owns a significant portion of voting shares, usually20–50%

Amjad Sultan
by Amjad Sultan , Accounts Manager , Abdul Latif Jameel Company

Associate company the company share the same owner but the subsidiary the company own the other company. 

Deleted user
by Deleted user

A Subsidiary is a company whose voting stock is more than50% controlled by another company, usually referred to as the parent company or holding company whereas Associate Company is a corporation whose parent company possesses only a minority stake in the ownership of the corporation or have significance influence.

Sadiq ul Islam
by Sadiq ul Islam , Financial Controller , BinDawood Holding Company (BDH)

Associate:

An entity over which the investor has significant influence and that is neither a subsidiary nor an interest in joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

 

Significant influence is assumed with a shareholding of20% to50%. Normally Equity accounting is used for consolidation of Associate companies.

 

 

Subsidiary:

A subsidiary is an entity that is controlled by another entity (known as the parent). Control means the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

 

Control is usually based on ownership of more than50% of voting power, but other forms of control are also possible. Usually accounts of subsidiary are consolidated in group financials.

Kush Sanghadia
by Kush Sanghadia , Article Executive, Audit Executive , Kumar and Giri Chartered Accountants

Associate Company - A Company with which the company does transactions on a regular basis.

Subsidiary Company - A Company in which51% or more share capital (Equity) is held.

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