What is an 'Associate Company'

An associate company is a corporation whose parent company possesses only a minority stake in the ownership of the corporation. An associate company is partly owned by another company or group of companies. The parent company or companies do not consolidate the associate company's financial statements. The parent company typically owns 20 to 50% of the voting shares; if more than 50% of the shares are owned by a parent company, it creates a subsidiary (where the parent company consolidates the financial statements). Typically, the parent company records the associate company's value as an asset in its balance sheet. Also called Associate.

BREAKING DOWN 'Associate Company'

Associate companies are not fully consolidated. Consolidated financial statements are the combined financial statements of a parent company and its associated company or subsidiaries. Rather than being consolidated, the revenue and profits from associate companies appear separately on the parent company's profit and loss (P&L) statements. Associate companies are sometimes created in host countries in the case of foreign direct investments to reduce any negative stigma connected to the foreign ownership.

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