associateettevõte

An associate company, or "ettevõte" in Estonian, refers to an entity over which another company exercises significant influence but does not have control. This influence is typically achieved through a substantial equity stake, often between 20% and 50%, although this is not a strict rule. Unlike a subsidiary, where the parent company has a controlling interest and can dictate its management, an associate company operates with a degree of autonomy.

The significant influence allows the investor company to participate in the associate's decision-making processes, including financial and operating policies. This participation is usually through representation on the board of directors or by having key management personnel appointed. The investor company is able to exert influence rather than command.

Accounting standards, such as International Financial Reporting Standards (IFRS), define specific criteria for identifying an associate. The equity method of accounting is commonly used to account for investments in associate companies. Under this method, the investment is initially recorded at cost and then adjusted to recognize the investor's share of the associate's net income or loss. Dividends received reduce the carrying amount of the investment.

The relationship with an associate company can be strategic, providing access to new markets, technologies, or expertise. It allows for a degree of collaboration and mutual benefit without the complexities of full consolidation. The financial performance of the associate is reflected in the investor's financial statements, providing a more comprehensive view of the investor's overall economic exposure.