AASB 128 - Investments in Associates and Joint Ventures - August 2015

What this Standard does:

AASB 128 sets the rules for how Australian entities must account for investments where they have significant influence or joint control over another entity—but don't fully control it.

Key concepts explained:

• Associate: A company where you own 20% or more of the voting power (or can prove influence another way), giving you "significant influence" over its decisions—but not control.
• Joint venture: An arrangement where you share control with others, with decisions requiring unanimous consent.
• Equity method: The main accounting technique required by this Standard. Instead of just recording dividends received, you record your share of the investee's profits and losses, adjusting the investment's value on your balance sheet accordingly.

Who it affects:

• Companies, not-for-profits, and other entities that hold stakes in associates or joint ventures
• Parent companies preparing consolidated financial statements
• Venture capital funds and similar investment vehicles (with specific exemptions)

Main requirements:

• Generally must use equity method: If you have significant influence or joint control, you must account for the investment using the equity method (with some exceptions).