Associate Company

AAA

DEFINITION of 'Associate Company'

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Foreign Direct Investment - FDI

    An investment made by a company or entity based in one country, ...
  2. Parent Company

    A company that controls other companies by owning an influential ...
  3. Profit and Loss Statement - P&L

    A financial statement that summarizes the revenues, costs and ...
  4. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  5. Affiliate

    A type of inter-company relationship in which one of the companies ...
  6. Unbundling

    The process of taking over a large company with several different ...
Related Articles
  1. Conglomerates: Cash Cows Or Corporate ...
    Investing Basics

    Conglomerates: Cash Cows Or Corporate ...

  2. Sneaky Subsidiary Tricks Can Cloud Financials
    Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

  3. What are the differences between affiliate, ...
    Investing

    What are the differences between affiliate, ...

  4. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

comments powered by Disqus
Hot Definitions
  1. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  2. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  3. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  4. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  5. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  6. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
Trading Center