A company owns shares in two other businesses, but their results appear differently in the annual report. Ownership alone does not tell you how the investment is accounted for. The relationship—especially control or significant influence—matters.
Look for the accounting basis
Under IFRS, a subsidiary is associated with control, while an associate involves significant influence without control or joint control. IAS 28 addresses investments in associates and joint ventures. Read it alongside the company’s stated accounting policies and applicable standards.
A shareholding percentage is useful evidence, but it is not always the complete test. Voting arrangements, contractual rights and other facts may matter. Avoid classifying every investment from a single ownership chart without reading the notes.
Understand why the totals look different
Consolidated subsidiaries generally enter group accounts line by line, subject to consolidation procedures and applicable exceptions. Associates are generally accounted for using the equity method in the relevant IFRS statements. That can mean a share of profit appears without the associate’s revenue being added line by line to group revenue.
As a result, two groups with similar economic interests can present different headline totals if the relationships differ. Do not add an associate’s entire sales figure to reported group revenue and call the sum the company’s official revenue.
Make a relationship note
For each significant holding, record the legal name, ownership interest, stated classification, accounting method and reporting date. Note changes during the year, such as gaining control or disposing of an interest.
This is a reading framework rather than a complete consolidation guide. Separate financial statements, local accounting rules and specific exemptions can change the presentation. The practical habit is to follow the report’s definitions before comparing company size from a headline number.