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Associates and Joint Ventures
FRS 9 sets out the definitions and accounting treatments for associates and joint ventures, two types of interests that a reporting entity may have in other entities. The standard requires that an associate (where the investor holds a participating interest and exercises significant influence) is accounted for in its investor's consolidated financial statements using the equity method. For a joint venture (where the investor's interest is long-term and it shares control with other investors) the FRS requires the use of the gross equity method in the investor's consolidated financial statements (ie, the investor's share of the gross assets and liabilities underlying the net amount of the investment is shown, in aggregate, on the face of the balance sheet, and, in the profit and loss account, the investor's share of the investee's turnover is noted). The FRS also deals with joint arrangements that are not entities. In these cases, participants should account for their own assets, liabilities and cash flows measured according to the agreement governing the arrangement.
The definitions and treatments prescribed have been developed to be consistent with the ASB's approach to accounting for subsidiaries (dealt with in FRS 2 'Accounting for Subsidiary Undertakings'). The requirements are also consistent with companies legislation. It was necessary to revise the previous standard on associates because of changes in companies legislation. However, the ASB decided to carry out a full review because the previous standard:
FRS 9 is effective for accounting periods ending on or after 23 June 1998.
To find out how to obtain a copy of this FRS, go to Publications. |
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