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. Profit and Loss Statement - P&L

    A financial statement that summarizes the revenues, costs and ...
  2. Foreign Direct Investment - FDI

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

    A company that controls other companies by owning an influential ...
  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. Investing Basics

    Conglomerates: Cash Cows Or Corporate Chaos?

    Huge companies may not be as infallible as previously assumed. Find out why bigger isn't always better.
  2. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  3. Investing

    What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, the terms affiliate and associate are used synonymously to describe a ...
  4. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  5. Trading Strategies

    General Electric: Good News/Bad News

    General Electric is generous to its shareholders, but that's not the only factor to consider.
  6. Stock Analysis

    A United Technologies Product: Always Closeby

    If you flown in an airplane, shopped for food or sat comfortably in a hot climate, you've probably used a United Technologies product.
  7. Stock Analysis

    How Warren Buffett made Berkshire Hathaway a World-beater

    It would almost be easier to list the industry sectors in which Omaha-based Berkshire Hathaway Inc. (NYSE:BRK.A) doesn’t turn gargantuan profits.
  8. Fundamental Analysis

    Understanding Leveraged Buyouts

    LBOs are often presented as predatory by the media, but it really depends on which side of the deal you're on.
  9. Investing News

    This Company Is No Mickey Mouse Operation

    With its famous history that's become part of popular culture, and the instantly recognizable silhouette in its logo, The Walt Disney Co. is only an animation studio in the same way that Johnson ...
  10. Chart Advisor

    This ETF Will Deliver Upside With Downside Protection

    With markets near all-time highs as naysayers warn of a coming correction, how can you stick around for more gains and still limit downside risk? The answer could be industrials.

You May Also Like

Hot Definitions
  1. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  2. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  3. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  4. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
  5. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In other words, if the debtor ...
  6. Dividend Discount Model - DDM

    A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The ...
Trading Center