Financial Reporting · Ind AS 28 Investments in Associates and Joint Ventures

Ind AS 28: Scope, Definitions and Significant Influence

Q: What is significant influence under Ind AS 28?

It is the power to participate in the financial and operating policy decisions of an investee without having control or joint control over them. An entity over which you have it is an associate. You then account for the investment using the equity method.

Q: Is 20% holding always an associate under Ind AS 28?

No. Holding 20% or more of voting power only creates a presumption of significant influence. You can rebut it if you clearly show that you cannot participate in policy decisions. Similarly, below 20% can still be an associate if other facts show real influence.

Q: What is the difference between an associate and a joint venture?

An associate involves significant influence only. A joint venture involves joint control through a contractual arrangement, where the parties have rights to the net assets. Both are accounted for using the equity method under Ind AS 28.

Q: How do potential voting rights affect the 20% test?

You consider the existence and effect of potential voting rights, such as warrants or options that are currently exercisable or currently convertible, when assessing significant influence. You do not consider management's intention or financial ability to exercise or convert them. The 20% test itself uses actual voting power held.

Q: How do Ind AS 110 and Ind AS 111 link with Ind AS 28?

Ind AS 110 decides if you control the investee and must consolidate it. Ind AS 111 decides if a joint arrangement is a joint operation or a joint venture. Ind AS 28 then applies to associates and to joint ventures.

Updated 5 October 2026 · Fact-checked

An associate is an entity over which the investor has significant influence: the power to take part in financial and operating policy decisions without controlling them. Holding 20% or more of voting power presumes significance, unless shown otherwise. To solve questions, rule out control and joint control first, then test the 20% presumption, other indicators and potential voting rights.

Understand Scope, Definitions and Significant Influence

Ind AS 28 deals with investments where you do not control the investee but still have a real say in it. It prescribes the equity method for these investments. This page covers who falls inside the standard, which is the first step in every question.

An associate is an entity over which the investor has significant influence. A joint venture is a joint arrangement where the parties with joint control have rights to the net assets of the arrangement. Joint control and joint operations are defined in Ind AS 111. Control is defined in Ind AS 110.

Significant influence is the power to participate in the financial and operating policy decisions of the investee. It is not control or joint control of those policies. Think of it as a seat at the table without the casting vote.

The standard gives a rebuttable presumption based on voting power. If you hold, directly or indirectly (for example through subsidiaries), 20% or more of the voting power, you are presumed to have significant influence. If you hold less than 20%, you are presumed not to, unless you can clearly demonstrate otherwise. A substantial or majority holding by another investor does not by itself rule out significant influence.

Other indicators are: representation on the board or equivalent governing body, participation in policy-making including dividend decisions, material transactions between you and the investee, interchange of managerial personnel, and provision of essential technical information. Also consider potential voting rights, such as share warrants, call options and convertible instruments. Consider the existence and effect of those that are currently exercisable or currently convertible. Do not consider the intention of management or the financial ability to exercise or convert them. The 20% test itself uses actual voting power held, and potential voting rights are weighed as part of the overall assessment.

On interaction: first apply Ind AS 110. If you control the investee, consolidate it and Ind AS 28 does not apply to that investment in the consolidated statements. If there is joint control, apply Ind AS 111 to classify the arrangement. A joint venture is then accounted for under Ind AS 28 by the equity method. A joint operation is not, and you recognise your share of assets, liabilities, revenue and expenses.

Key rules to remember

Associate: Associate = entity over which the investor has significant influence; Significant influence means power to participate in, but not control or jointly control, policy decisions.
Joint venture: Joint venture = joint arrangement where the joint controllers have rights to the net assets; If they have rights to assets and obligations for liabilities, it is a joint operation under Ind AS 111.
Voting power presumption: Voting power ≥ 20% → presumed significant influence; < 20% → presumed none; Both presumptions are rebuttable by clear evidence. Use direct holdings plus indirect holdings through subsidiaries.
Potential voting rights: Consider the existence and effect of rights currently exercisable or currently convertible in the assessment of significant influence; Do not consider management's intention or financial ability to exercise or convert them.
Order of assessment: Control (Ind AS 110) → Joint control (Ind AS 111) → Significant influence (Ind AS 28); Ind AS 28 applies to associates and to joint ventures accounted for by the equity method.

How to solve Scope, Definitions and Significant Influence questions

Use this sequence for any scope question. Write each step in your answer in provision, facts, conclusion form.

1Identify the stake: voting power held directly, plus indirectly through subsidiaries.
2Test control under Ind AS 110 (power, exposure to variable returns, link between them). If control exists, consolidate and stop.
3Check for a contractual arrangement with joint control. If present, classify under Ind AS 111 as a joint operation or joint venture.
4For a joint venture, note that Ind AS 28 applies and the equity method is used. For a joint operation, say Ind AS 28 does not apply.
5If neither, apply the 20% presumption to voting power.
6Look for other indicators: board seat, policy participation, material transactions, managerial interchange, technical information.
7Consider the existence and effect of potential voting rights that are currently exercisable or convertible. Ignore management's intention and financial ability to exercise or convert.
8State a clear conclusion: associate, not associate, joint venture or subsidiary, with the reason.

Quickest way: Control, joint control, then 20%

When to use it: Use in MCQs and short case scenarios where you must classify an investee in under two minutes.

Underline the percentage and any rights, options or board seats in the case.
Ask: does the investor control it? If yes, it is a subsidiary.
Ask: is there a contract that needs unanimous consent of the parties? If yes, it is a joint arrangement. Check whether rights are to net assets (joint venture) or to assets and liabilities (joint operation).
Otherwise, 20% or more suggests an associate and below 20% suggests not, unless the case gives clear contrary facts such as a board seat or no real say.
Check if the case includes currently exercisable options and adjust your view. Ignore statements about what the investor intends or can afford.

Common mistakes in Scope, Definitions and Significant Influence

Treating 20% as a fixed rule that always decides the answer.
Students remember the number and forget the word presumption.
Fix: Say the presumption is rebuttable. Look for facts that rebut it either way.
Applying Ind AS 28 to a joint operation.
Students think every joint arrangement uses the equity method.
Fix: Only a joint venture uses the equity method. A joint operation recognises the investor's share of assets, liabilities, revenue and expenses.
Ignoring indirect holdings through subsidiaries.
Students look only at the parent's direct shareholding.
Fix: Add voting power held by subsidiaries to the direct holding when testing the 20% threshold.
Counting all options and warrants as potential voting rights, or relying on intention and ability to exercise them.
Students count any instrument that could become shares, or reason from what the investor plans to do.
Fix: Consider the existence and effect of rights that are currently exercisable or convertible. Do not consider management's intention or financial ability to exercise or convert.
Skipping the control test and calling a 55% investee an associate.
Students start from Ind AS 28 because the chapter is titled so.
Fix: Always test Ind AS 110 first. Control means a subsidiary and consolidation, not equity method.
Concluding there is no significant influence just because another investor holds a majority.
Students assume one major holder blocks everyone else.
Fix: Majority ownership by another does not by itself preclude significant influence. Check for board seat and policy participation.

Worked examples

Example 1

Alpha Ltd holds 24% of the voting power in Beta Ltd. Alpha has no board seat and no say in policy. The other 76% is held by a single investor, who has been making all policy decisions. Alpha has no other rights in Beta. Does Alpha have significant influence?

Show the solution

Provision: a holding of 20% or more of voting power presumes significant influence, but the presumption can be rebutted by clear evidence.
Control and joint control: Alpha holds 24% and has no contractual joint control, so neither applies.
Facts: Alpha has no board seat, no policy participation and no other rights. Another investor holds 76% and decides everything.
Majority ownership by another does not by itself rule out significant influence, but here the facts show Alpha cannot participate in policy decisions, which clearly rebuts the presumption.

Answer: Alpha does not have significant influence, so Beta is not an associate. The 20% presumption is rebutted by clear evidence of no participation in policy decisions. Alpha does not apply the equity method under Ind AS 28 and accounts for the investment under the relevant financial instruments standard.

Example 2

Gamma Ltd holds 15% of the voting power in Delta Ltd. Gamma also holds warrants that are currently exercisable and would give it a further 8% of voting power. Gamma has a representative on Delta's board. Gamma's management says it intends to exercise the warrants and has the funds to do so. Does Gamma have significant influence?

Show the solution

Provision: below 20% of voting power, significant influence is presumed absent unless clearly demonstrated. The existence and effect of potential voting rights that are currently exercisable or convertible are considered. Management's intention and financial ability to exercise are not considered.
Control: 15% actual voting power does not give control, and nothing in the facts gives Gamma power over Delta's relevant activities. Joint control is not indicated.
Facts: Gamma has a board seat, which shows participation in policy decisions. The warrants are currently exercisable, so their existence and effect are considered along with the board representation.
Gamma's intention and ability to exercise the warrants are irrelevant to the assessment, so ignore them. The board seat and the currently exercisable warrants together demonstrate that Gamma can participate in policy decisions, so the presumption of no influence is rebutted.

Answer: Gamma has significant influence over Delta through the board seat plus the currently exercisable warrants. Delta is an associate and Gamma applies the equity method under Ind AS 28. Gamma's intention and financial ability to exercise the warrants play no part in this conclusion.

Exam tips

Write the sequence control, joint control, significant influence in your answer. It scores marks even if the final call is debatable.
In case MCQs, look for trap words: currently exercisable, board representation and indirect holding. Treat statements about intention or ability to exercise as distractors.
For joint arrangements, always state whether the rights are to net assets or to assets and liabilities before naming the accounting.
Use the word presumption and mention that it can be rebutted, in both directions.
Do not compute equity method figures in a scope question unless asked. Spend your time on classification and reasons.

Practice questions from Ind AS 28 Investments in Associates and Joint Ventures

Scope, Definitions and Significant Influence in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CA IntermediateAS 23 Scope, Definitions and Significant Influence

Scope, Definitions and Significant Influence: frequently asked questions

What is significant influence under Ind AS 28?

It is the power to participate in the financial and operating policy decisions of an investee without having control or joint control over them. An entity over which you have it is an associate. You then account for the investment using the equity method.

Is 20% holding always an associate under Ind AS 28?

No. Holding 20% or more of voting power only creates a presumption of significant influence. You can rebut it if you clearly show that you cannot participate in policy decisions. Similarly, below 20% can still be an associate if other facts show real influence.

What is the difference between an associate and a joint venture?

An associate involves significant influence only. A joint venture involves joint control through a contractual arrangement, where the parties have rights to the net assets. Both are accounted for using the equity method under Ind AS 28.

How do potential voting rights affect the 20% test?

You consider the existence and effect of potential voting rights, such as warrants or options that are currently exercisable or currently convertible, when assessing significant influence. You do not consider management's intention or financial ability to exercise or convert them. The 20% test itself uses actual voting power held.

How do Ind AS 110 and Ind AS 111 link with Ind AS 28?

Ind AS 110 decides if you control the investee and must consolidate it. Ind AS 111 decides if a joint arrangement is a joint operation or a joint venture. Ind AS 28 then applies to associates and to joint ventures.