Strategic Business Reporting (International) · Associates and joint arrangements

Changes in Associate or Joint Venture Holdings in SBR

Updated 11 October 2026 · Fact-checked

A change in an associate or joint venture holding means the investor's stake or influence moves. Identify the new status first. Increases that keep equity accounting add cost. Gaining control or losing significant influence remeasures the old stake to fair value, with the gain or loss in profit or loss. Partial disposals with influence retained give a gain on the part sold only.

Understand Changes in Associate or Joint Venture Holdings

An associate or joint venture is equity accounted under IAS 28. You show one line in the statement of financial position, which is cost plus your share of post-acquisition profits and OCI, less impairment and distributions. When your holding changes, the question is simple: what is the investment after the change? The answer decides the accounting.

There are four routes. First, the stake rises and the investee stays an associate or joint venture. Second, the stake rises and you gain control, so the investee becomes a subsidiary. Third, the stake falls but you keep significant influence or joint control. Fourth, the stake falls and you lose significant influence, so it becomes a financial asset under IFRS 9.

The key idea is that a change in status is treated as a disposal of the old investment and an acquisition of a new one, at fair value. That is why a step acquisition to control (IFRS 3) remeasures the old associate stake to fair value, and why loss of significant influence remeasures the retained stake to fair value. Gains and losses go to profit or loss. When status does not change, there is no remeasurement. Only the part sold gives a gain or loss.

An associate that becomes a joint venture, or the reverse, keeps the equity method. You do not remeasure the retained interest. A subsidiary that becomes an associate is a loss of control under IFRS 10. The retained stake is measured at fair value and becomes the cost of the associate.

The share of profit is always taken up to the date of the change, so time-apportion the investee's profit. If part of the holding meets the held-for-sale criteria under IFRS 5, that part is classified as held for sale. The rest stays equity accounted until the disposal happens.

Key rules to remember

Associate to subsidiary: goodwill: Goodwill = consideration for new stake + fair value of previously held stake + NCI − fair value of identifiable net assets at the date control is gained; NCI is at fair value or at proportionate share of net assets, as the question says. The old associate stake is at fair value, not carrying amount.
Associate to subsidiary: remeasurement gain: Gain or loss in P/L = fair value of previously held stake − carrying amount of the associate (equity method balance) + reclassifiable OCI; Fair value less carrying amount is the starting gain. Add to it any associate OCI that would be reclassified to P/L if the associate had disposed of the related assets directly, such as exchange differences. Non-reclassifiable OCI, such as a revaluation surplus, does not go to P/L. It is transferred within equity, for example to retained earnings.
Increase in stake, still an associate: New carrying amount = old carrying amount + cost of extra shares + share of post-acquisition changes; No remeasurement and no gain or loss. Add the cost of the additional shares to the existing carrying amount. The investee's identifiable net assets are not remeasured. Compare the cost of the extra shares with your share of the fair values acquired only to identify any goodwill, or any bargain purchase, within the carrying amount.
Partial disposal, significant influence retained: Gain or loss = proceeds − (carrying amount × proportion sold); Reclassify the same proportion of any associate OCI that would be reclassified on a disposal. The retained stake is not remeasured.
Loss of significant influence: Gain or loss = proceeds + fair value of retained stake − carrying amount of whole associate; Update the carrying amount to the date of disposal first. The retained stake is then an IFRS 9 financial asset, with fair value as its initial carrying amount.
Associate and joint venture swaps: Associate to joint venture, or joint venture to associate: continue the equity method with no remeasurement; Applies while significant influence or joint control continues. Control gained or lost follows IFRS 3 and IFRS 10.
Subsidiary to associate (loss of control): Gain or loss = proceeds + fair value of retained interest − (carrying amount of the subsidiary's net assets + goodwill − carrying amount of NCI derecognised) + related OCI reclassified; The NCI is derecognised, so its carrying amount is taken out of the amount you deduct. What you deduct is the parent's share of net assets and goodwill. Reclassify the related OCI as if the subsidiary's assets had been disposed of directly. The retained stake at fair value becomes the cost of the associate for IAS 28. Take the gain in group P/L.

How to solve Changes in Associate or Joint Venture Holdings questions

Use this order for any question where a holding in an associate or joint venture changes. It works for increases, decreases and status changes.

1Write down the holding before and after, and the date of the change. Decide the status before and after: financial asset, associate, joint venture or subsidiary.
2Bring the equity-method carrying amount up to the date of change. Add the share of profit to that date, time-apportioned, less dividends, impairment and any unrealised profit adjustments.
3Choose the rule from the status change. Remeasure to fair value if control is gained or significant influence is lost. Do not remeasure if status stays as associate or joint venture.
4For a disposal with influence kept, calculate the gain on the part sold only. For a loss of influence or a gain of control, include the fair value of the retained or previously held stake.
5Deal with OCI. Reclassify the associate's OCI to P/L only if it would be reclassified on a disposal of the underlying items. Move revaluation surpluses within equity only.
6If control is gained, calculate goodwill using the fair value of the old stake, the new consideration, NCI and fair value of net assets. Then consolidate from that date.
7State the closing carrying amount and where the gain or loss goes. Add a sentence on the judgement made, such as whether significant influence has really been lost.

Quickest way: Status test and one-line gain

When to use it: Use this when time is short and you need the gain or loss and the new carrying amount before writing the narrative.

Ask: is there control after the change? If yes, remeasure the old stake to fair value and compute goodwill.
If not, ask: is there still significant influence or joint control? If yes, there is no remeasurement. Gain is on the part sold only: proceeds − carrying amount × proportion sold.
If influence has gone, use one line: proceeds + fair value of retained stake − full carrying amount.
Update the carrying amount to the date of change before using it. This is the step most often missed.
Write the new balance: retained carrying amount, or fair value as the IFRS 9 asset, or consolidated goodwill.

Common mistakes in Changes in Associate or Joint Venture Holdings

Remeasuring the retained stake to fair value when the associate is only partly sold and influence remains.
Students mix up the loss-of-influence rule with the partial-disposal rule.
Fix: Remeasure only when status changes. If the investee is still an associate or joint venture, take a gain on the part sold only.
Using the carrying amount of the old associate stake in the goodwill calculation when control is gained.
It looks like a normal step acquisition where cost accumulates.
Fix: Use the fair value at the date control is gained. Put the difference from carrying amount in P/L as a gain or loss.
Forgetting to take the share of profit up to the date of change.
The question gives full-year profit, and students use the opening carrying amount.
Fix: Time-apportion profit to the date of change and update the carrying amount before computing any gain.
Taking a revaluation surplus or other non-reclassifiable OCI to P/L on disposal.
Students assume all OCI is recycled.
Fix: Reclassify only items that would be reclassified if the associate disposed of the related assets. A revaluation surplus moves to retained earnings within equity.
Treating a move from associate to joint venture as a disposal and re-acquisition.
Students over-apply the fair value rule for status changes.
Fix: Between associate and joint venture, keep the equity method and do not remeasure.
Leaving out an explanation of why influence has been lost or gained.
Students focus on the numbers only.
Fix: State the evidence, such as board seats, voting rights or participation in policy decisions. SBR rewards the judgement and the link to the scenario.

Worked examples

Example 1

Pavan holds 30% of Anika and equity accounts for it. On 30 September 20X6, Pavan buys a further 40% of Anika for $30m cash and gains control. At that date: the carrying amount of the 30% associate is $13.5m, the fair value of the 30% is $14.4m, the fair value of the 30% NCI is $10.8m, and the fair value of Anika's identifiable net assets is $50m. Calculate the gain on the previously held stake and the goodwill at acquisition.

Show the solution

Status changes from associate to subsidiary, so the old 30% stake is remeasured to fair value at 30 September 20X6.
Gain = fair value $14.4m − carrying amount $13.5m = $0.9m. This goes to group profit or loss. The associate's carrying amount is derecognised.
Goodwill = consideration $30m + fair value of old stake $14.4m + NCI at fair value $10.8m − net assets $50m.
$30m + $14.4m + $10.8m = $55.2m. Less $50m gives $5.2m.
Anika is consolidated from 30 September 20X6. Pavan holds 70% and the NCI holds 30%.

Answer: Gain of $0.9m in profit or loss. Goodwill of $5.2m.

Example 2

Rohan holds 40% of Bela, an associate, with a carrying amount of $20m at the date of disposal (already updated for profits to that date). Consider two independent cases. (a) Rohan sells 10% for $6m and keeps significant influence. (b) Rohan sells 25% for $13m and keeps 15%, with fair value $7.5m, and loses significant influence. Ignore OCI and tax. Calculate the gain in each case and state the carrying amount of the remaining investment.

Show the solution

Case (a): status stays associate, so there is no remeasurement. The part sold is 10% out of 40%, which is one quarter of the holding.
Carrying amount of the part sold = $20m × 10/40 = $5m. Gain = $6m − $5m = $1m.
Remaining carrying amount in (a) = $20m − $5m = $15m, still equity accounted.
Case (b): influence is lost, so equity accounting stops and the retained 15% is remeasured to fair value.
Gain = proceeds $13m + fair value of retained stake $7.5m − carrying amount $20m = $0.5m.
The retained 15% is recognised at $7.5m as a financial asset under IFRS 9. Future changes follow its classification.

Answer: (a) Gain $1m. Remaining carrying amount $15m, still an associate. (b) Gain $0.5m. Retained 15% held at $7.5m as an IFRS 9 financial asset.

Exam tips

Start your answer with the status before and after. Markers give credit for naming the correct rule, such as IFRS 3 step acquisition or IAS 28 loss of significant influence.
Update the carrying amount to the date of change first. Many scripts lose marks by using the opening balance.
Show the gain in a short line with each component labelled: proceeds, fair value of retained stake and carrying amount. Method marks are given even if one figure is wrong.
In scenario questions, comment on whether significant influence or control really exists. Look at board representation, voting patterns and agreements between investors, and apply this to the facts given.
For the professional skills marks, add a short note for the board on the effect on profit and on key ratios, such as one-off gains from remeasurement that are not part of core earnings.

Practice questions from Associates and joint arrangements

Changes in Associate or Joint Venture Holdings: frequently asked questions

What happens when an associate becomes a subsidiary?

Under IFRS 3, the old associate stake is remeasured to fair value at the date control is gained. The gain or loss goes to profit or loss. Goodwill is then calculated using that fair value, the new consideration and the NCI.

Is there a gain when I sell part of an associate but keep significant influence?

Yes, but only on the part sold. Gain is proceeds less the matching share of the carrying amount. You do not remeasure the retained stake, and you reclassify the matching share of OCI that would be reclassified.

What is the accounting when significant influence is lost under IAS 28?

Stop equity accounting from that date. The retained stake is measured at fair value and becomes an IFRS 9 financial asset. The gain or loss is proceeds plus fair value of the retained stake, less the carrying amount of the whole associate.

Do I remeasure when an associate becomes a joint venture?

No. Both are equity accounted under IAS 28, so you carry on with the same method and the retained interest is not remeasured. This applies as long as significant influence or joint control exists.