Associates are entities in which the parent company has significant influence directly or through subsidiaries, and which are neither its subsidiaries nor joint ventures.
Joint ventures are contractual arrangements whereby two or more parties undertake an economic activity that is subject to joint control.
The financial year of associates, joint ventures, and the parent company is the same. Associates and joint ventures apply accounting principles consistent with the Group principles.
The Group investments in associates and joint ventures are recognised in the consolidated financial statements using the equity method. According to the equity method, the investment in an associate or joint venture is initially recognised at cost and then adjusted to reflect the Group’s share in the financial result and other comprehensive income of the associate or joint venture. If the Group’s share in losses of the associate or joint venture exceeds the value of its shares in that entity, the Group discontinues recognising its share in further losses. Additional losses are recognised only to the extent corresponding to legal or customary obligations adopted by the Group or payments made on behalf of the associate or joint venture.
The investment in an associate or joint venture is recognised using the equity method from the date on which the entity acquired the status of a joint venture or associate. On the date of making the investment in an associate or joint venture, the amount by which the investment costs exceed the Group’s share in the net fair value of identifiable assets and liabilities of that entity is recognised as goodwill and recognised in the carrying amount of the investment. The amount by which the Group’s share in net fair value of identifiable assets and liabilities exceeds the cost of the investment is directly recognised in profit or loss in the period in which the investment was made.
When assessing the need for the recognition of the impairment of the Group’s investment in an associate or joint venture, IFRS 9 applies. If necessary, the entire carrying amount of the investment is tested for impairment in accordance with IAS 36 Impairment of Assets as an individual asset, comparing its recoverable amount with the carrying amount.
The Group ceases to apply the equity method on the day when the investment is no longer an associate or joint venture and when it is classified as held for sale. The difference between the carrying amount of an associate or joint venture at the date of cessation of the use of the equity method and the fair value of the retained shares and profits from the partial sale of shares in the entity is taken into account when calculating the profit or loss on the sales of the associate or joint venture.
If the Group reduces its interest in an associate or joint venture, but it still accounts for it using the equity method, it transfers to profit or loss a part of profit or loss recognised previously in other comprehensive income, corresponding to the decrease in the interest, if the profit or loss is subject to reclassification to profit or loss at the time of the sales of related assets or liabilities.
