TYPE OF INVESTMENT

SUBSIDIARY A S S O C I AT E JOINT ARRANGEMENT

(MFRS 3, 10) (MFRS 128) (MFRS 11)

CRITERIA Control Significant Influence Joint Control

(Type classification depends on
rights and obligations)

SHARE >50% 20%+ Equal

Acquisition Method Equity Method Depends on the type of JA

ACCOUNTING (JV uses equity method)
(full consolidation)

O T H E R I N V E S T M E N T – Financial instrument (MFRS 9)

INVESTMENTS IN ASSOCIATES AND

//////////////// MFRS 128 JOINT VENTURE

ASSOCIATES
= an entity over which the investor
OBJECTIVE
has “significant influence”

To s et o u t t h e
To p r e s c ribe requirements for
the accounting the application
fo r A S S O C IATES of EQUITY
METHOD

SIGNIFICANT INFLUENCE
= a power to participate in the financial and operating policy decisions of the
investee (associate) but it is not control or joint control of these policies.

////////////////////////
INDICATOR; Evidence of significant
influence:
voting
1. Representation in BOD
power 2. Participation in policy making
20% +
3. Interchange of management
Investor Associate
4. Material transactions
5. Provision of essential technical
BUT! the % is not a decisive factor.
information

////////////////////////
When will the entity doesn’t need
to apply the equity method?

An entity with a Joint Control
/ Significant Influence in an
investee shall account for its
investment in an associate
or joint venture using
EQUITY METHOD
1. Entity is a subsidiary of another entity and its
owners have been informed about and do not
object to the entity not applying the equity
method
2. Entity’s instruments are not publicly traded
3. Entity is not in process of issuing publicly
traded securities
4. The ultimate / any intermediary parent
produces consolidated financial statement

EQUITY METHOD
//////////////////////// ////////////////////////
On initial After the acquisition date
recognition (at cost) 1. For an example, investor decreases share
on investee’s SOPL
Dr SOFP – Investment in Associate
Dr SOFP - Investment in Associate Cr SOPL – Profit from Associate
Cr Cash
2. Distributions received from investee, e.g.
dividends
Dr Cash
Cr SOFP – Investment in Associate

WHEN WILL EQUITY METHOD

BE DISCONTINUED?
= when Significant Influence
CEASES TO EXIST

e.g. Investor acquire some additional share and

significant influence upgrade to control, then
investor stop equity method and starts full
consolidation (acquisition method).

CREATED FOR:
ADVISOR TEAM MEMBERS
ACCOUNTHINK INNO
DR. AZLINA RAHIM NOVEMBER 2019 AF R I N A M O K H TAR
AT I Q A H A Z M I
MAC2205B NIK RUBIAH SALLEH
SHAHIRA ZAINURIN