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IAS 28

Investments in Associates and Joint Ventures

IAS 28 sets out the requirements for applying the equity method of accounting to investments in associates (entities over which an investor has significant influence but not control) and joint ventures (arrangements over which parties have joint control and rights to the net assets), requiring the investment to be adjusted each period for the investor's share of the investee's profit or loss and other comprehensive income. [S1]

Effective 2013-01-01Related: IFRS 10 · IFRS 11 · IFRS 12 · IAS 36 · IFRS 9

Overview

An associate is an entity over which an investor has significant influence — the power to participate in financial and operating policy decisions, without control or joint control of those policies — while a joint venture is a joint arrangement in which the parties with joint control have rights to the net assets of the arrangement. [S1] Both are accounted for using the equity method: the investment is initially recognised at cost, and its carrying amount is adjusted thereafter to recognise the investor's share of the investee's post-acquisition profit or loss and other comprehensive income, with distributions received reducing the carrying amount rather than being recognised as income. [S2]

Why it matters

Equity-accounted investments are common in Nigerian joint ventures across oil and gas, telecommunications, banking and manufacturing, and the equity method's mechanics — unlike consolidation, which combines line by line, or the cost/fair value approaches used for passive investments — mean the investor's own profit or loss and equity move in step with the investee's performance, even though only a single net investment line appears on the investor's statement of financial position. Getting the significant-influence threshold, the loss-recognition limit, or the impairment interaction with IFRS 9 wrong can materially misstate both the investment balance and the investor's reported profit.

Scope

Applies to all entities that are investors with joint control of, or significant influence over, an investee. Venture capital organisations, mutual funds, unit trusts and similar entities may elect to measure investments in associates or joint ventures at fair value through profit or loss under IFRS 9 instead of applying the equity method, and an entity that is itself exempt from preparing consolidated financial statements under IFRS 10 need not apply the equity method to its associates and joint ventures either. The equity method is not applied to an investment classified as held for sale (or included in a disposal group) under IFRS 5.

Key definitions

term: Significant influence
definition: The power to participate in the financial and operating policy decisions of the investee, but not control or joint control over those policies; generally presumed where the investor holds 20% or more of the voting power, rebuttable with evidence.
term: Associate
definition: An entity over which the investor has significant influence.
term: Joint venture
definition: A joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement.
term: Joint control
definition: The contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.
term: Equity method
definition: A method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor's share of the investee's net assets, with the investor's share of the investee's profit or loss recognised in the investor's profit or loss.

Recognition

An investment in an associate or joint venture is recognised at cost on acquisition and subsequently accounted for using the equity method from the date significant influence or joint control is obtained until the date it ceases. Significant influence is presumed (rebuttably) where the investor holds, directly or indirectly, 20% or more of the voting power of the investee, and is presumed not to exist below that threshold unless it can be clearly demonstrated; evidence of significant influence includes board representation, participation in policy-making processes, material transactions between investor and investee, interchange of managerial personnel, or provision of essential technical information.

Initial measurement

The investment is initially measured at cost, including any goodwill-like excess of the cost of the investment over the investor's share of the net fair value of the investee's identifiable assets and liabilities (this excess is included within the carrying amount of the investment, not recognised as separate goodwill on the investor's own statement of financial position); if the investor's share of the net fair value exceeds the cost of the investment, the excess is included as income in determining the investor's share of the investee's profit or loss in the period of acquisition.

Subsequent measurement

The carrying amount of the investment is increased or decreased each period to recognise the investor's share of the investee's profit or loss, with a corresponding amount recognised in the investor's own profit or loss; the investor's share of the investee's other comprehensive income is recognised in the investor's own OCI. Distributions (dividends) received from the investee reduce the carrying amount of the investment rather than being recognised as income. If the investor's share of losses of an associate or joint venture equals or exceeds its interest in that investee (comprising the equity-accounted carrying amount plus any long-term interests that in substance form part of the net investment), the investor discontinues recognising its share of further losses, except to the extent the investor has incurred legal or constructive obligations or made payments on behalf of the investee; recognition of further profits resumes only after the investor's share of profits equals the share of unrecognised losses. The entire carrying amount of the investment (not the underlying assets of the investee individually) is tested for impairment under IAS 36 when there is objective evidence that it may be impaired, with any impairment loss not allocated to any individual asset (including goodwill-like amounts embedded in the carrying amount) but attributed to the investment as a whole. [S2]

Presentation

Investments in associates and joint ventures are presented as a single line item in the investor's statement of financial position, with the investor's share of the investee's profit or loss presented as a single line item in the investor's statement of profit or loss (separate from operating profit, since it does not represent revenue or ordinary operating expense of the investor itself), and the investor's share of OCI of the investee presented within the investor's own OCI section.

Disclosure checklist

Significant judgements and assumptions in determining that an entity does not have significant influence or joint control despite holding 20% or more (or does have it despite holding less than 20%) of the voting power of another entity.
Summarised financial information for material associates and joint ventures, including their assets, liabilities, revenue and profit or loss.
The fair value of investments in associates and joint ventures for which there are published price quotations.
Unrecognised share of losses of an associate or joint venture, both for the period and cumulatively, if the investor has discontinued recognising its share of losses.
The nature and extent of any significant restrictions on the ability of associates or joint ventures to transfer funds to the investor in the form of cash dividends or repayment of loans/advances.
The investor's share of contingent liabilities incurred jointly with other investors in a joint venture, and contingent liabilities arising because the investor is severally liable for the liabilities of an associate or joint venture.

Practical treatment

The threshold judgement is significant influence, not simply the 20% voting-power test in isolation: board representation, participation in strategic decisions, material intercompany trading, or technology/personnel sharing arrangements can establish significant influence well below 20%, and a passive 20%+ shareholding with no board seat and no involvement in policy decisions can rebut the presumption. Once the equity method applies, the practical discipline is obtaining the investee's own financial information on a timely basis (using the most recent available financial statements, adjusted for significant transactions or events between the investee's reporting date and the investor's own, if the dates differ), applying uniform accounting policies, and monitoring cumulative losses against the loss-recognition ceiling. See nigeria_notes for common Nigerian joint venture and associate structures and their practical consequences.

Common mistakes

Applying the equity method mechanically at exactly 20% ownership without assessing the actual substance of influence (board seats, policy participation, material transactions).
Continuing to recognise a share of an associate's or joint venture's losses beyond the point the investment's carrying amount (plus qualifying long-term interests) is reduced to zero, without a legal or constructive obligation justifying further loss recognition.
Testing individual assets within an equity-accounted investee for impairment rather than testing the single, aggregate equity-method carrying amount as one unit under IAS 36.
Recognising dividends received from an associate or joint venture as income rather than as a reduction of the equity-accounted investment's carrying amount.
Using outdated or significantly non-aligned financial information from the investee without adjusting for known material transactions or events between reporting dates.
Failing to recognise, on losing significant influence or joint control, the requirement to remeasure any retained interest at fair value with the difference recognised in profit or loss.

Links with other standards

code: IFRS 10
relationship: IFRS 10's control definition determines the boundary between a subsidiary (consolidated) and an associate or joint venture (equity accounted); a loss of control resulting in retained significant influence transitions the investment from IFRS 10 consolidation to IAS 28 equity accounting.
code: IFRS 11
relationship: IFRS 11 determines whether a joint arrangement is a joint venture (equity accounted under IAS 28) or a joint operation (each party recognises its own share of assets, liabilities, revenue and expenses directly, not through the equity method).
code: IFRS 12
relationship: IFRS 12 sets out the disclosure requirements for interests in associates and joint ventures that complement IAS 28's recognition and measurement requirements.
code: IAS 36
relationship: The entire equity-accounted carrying amount of an investment in an associate or joint venture is tested for impairment as a single asset under IAS 36 when objective evidence of impairment exists, rather than testing the investee's underlying assets separately.
code: IFRS 9
relationship: Long-term interests in an associate or joint venture that in substance form part of the net investment but to which the equity method is not applied (e.g. certain long-term loans) are accounted for under IFRS 9, including its expected credit loss requirements, before any equity method loss allocation is applied to the net investment as a whole. [S2]

CFO checklist

Document the significant influence (or joint control) assessment for each material investee, considering board representation, policy participation and material transactions, not just voting percentage.
Obtain timely financial information from associates and joint ventures, adjusting for known material transactions or events between differing reporting dates.
Track cumulative losses recognised against the loss-recognition ceiling for each equity-accounted investment.
Test the aggregate equity-method carrying amount (not individual investee assets) for impairment under IAS 36 when objective evidence exists.
Confirm dividends from associates and joint ventures are recognised as a reduction of the investment's carrying amount, not as income.
Reassess classification (associate, joint venture, or neither) whenever shareholder agreements, board composition, or funding arrangements change.

FAQs

q: We hold 15% of a company but have a seat on its board and are consulted on major strategic decisions — do we equity account for it?
a: Possibly, yes. Significant influence is presumed at 20% or more of voting power, but it can also exist below that threshold where there is clear evidence of it, such as board representation and genuine participation in the investee's financial and operating policy decisions; the 20% threshold is a rebuttable presumption in both directions, not a hard rule.
q: Our share of an associate's losses has reduced our investment to zero — do we recognise further losses?
a: Only to the extent the investor has incurred legal or constructive obligations, or made payments, on behalf of the associate; otherwise, further losses are not recognised once the investment's carrying amount (including qualifying long-term interests) reaches zero, and recognition of future profits resumes only after the investor's share of profits equals the cumulative unrecognised losses.
q: Do we test our associate's individual underlying assets for impairment?
a: No. The entire carrying amount of the equity-accounted investment is tested for impairment as a single asset under IAS 36 when objective evidence of impairment exists; any impairment loss is not allocated to specific underlying assets of the associate, including any goodwill-like amount embedded within the investment's carrying value.

Nigeria application notes

Regulatory overlay

IAS 28 applies in full to Nigerian public interest entities under the FRCN Act 2011 mandate. [S3] Nigerian joint venture and associate structures are common in sectors such as oil and gas (operator/non-operator joint arrangements), banking (strategic minority shareholdings), and telecommunications, and CAMA 2020's disclosure requirements around beneficial ownership and significant shareholdings are relevant background for identifying and evidencing significant influence or joint control in these structures. [S4] Formation of a Nigerian joint venture or acquisition of an associate stake often involves sector regulator consent and, for larger transactions, SEC oversight, which affects deal timing and structuring but not the IAS 28 recognition and measurement principles applied once the investment is in place. [S5]

Tax interaction (Nigeria)

An associate or joint venture is a separate taxable entity under Nigerian companies income tax law, assessed independently at the standard illustrative rate of 30% (or the small-company rate, subject to qualifying conditions) under the Nigeria Tax Act 2025; the investor's share of the associate's or joint venture's profit or loss recognised under the equity method for accounting purposes does not itself create a tax liability or deduction for the investor, since Nigerian tax follows each entity's own separate profits, not the investor's equity-accounted share. [S6][S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, CGT, stamp duties, withholding tax categories, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, CAC/CAMA requirements, FRCN guidance, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Where an associate or joint venture has a functional currency different from the investor's own, the investor's share of the investee's profit or loss and net assets is translated consistent with IAS 21 principles (broadly mirroring the treatment for a foreign subsidiary under IFRS 10), with translation differences recognised in the investor's OCI; naira volatility can materially affect the reported carrying amount of an equity-accounted investment in a foreign-currency-functional associate or joint venture even where the underlying business performance is stable.

SME practical note

Nigerian SME joint ventures are frequently documented informally, through a shareholders' agreement rather than a fully worked-out joint arrangement analysis; Outliers recommends obtaining and reviewing the actual governance and funding arrangement documents before concluding on significant influence, joint control, or neither, since the accounting consequences (equity method versus cost/fair value versus proportionate joint operation treatment under IFRS 11) differ significantly and are easy to get wrong from a percentage shareholding alone.

Common Nigerian pitfalls

Assuming a shareholding below 20% cannot be an associate, missing board-representation or policy-participation evidence of significant influence.
Treating a Nigerian joint venture as automatically equity-accounted without first determining, under IFRS 11, whether it is a joint venture (equity accounted) or a joint operation (proportionate recognition of assets, liabilities, revenue and expenses).
Assuming the investor can deduct or is taxed on its equity-accounted share of an associate's losses or profits, when Nigerian CIT is assessed on each entity separately.
Continuing to recognise equity-method losses beyond the zero-carrying-amount ceiling without a qualifying legal or constructive obligation.

FRC pronouncements

No FRCN pronouncement specific to IAS 28 has been identified; the relevant FRCN context is its overarching mandate to promote IFRS compliance. [S3]

Worked examples

Initial recognition and share of profit under the equity method

A Nigerian company acquires a 30% interest in another company for ₦90,000,000, giving it board representation and significant influence (but not control). At acquisition, the investor's share of the investee's identifiable net assets at fair value is ₦80,000,000. In the first year, the investee reports profit after tax of ₦40,000,000 and pays no dividend.

Facts

Workings

Excess of cost over share of net fair value (included within the investment's carrying amount, not recognised as separate goodwill): 90,000,000 - 80,000,000 = 10,000,000

Investor's share of investee's profit for the year: 30% x 40,000,000 = 12,000,000

Closing carrying amount of the investment: 90,000,000 + 12,000,000 = 102,000,000

Journal entries

Recognise the initial investment in the associate at cost.

Account	Dr (₦)	Cr (₦)
Investment in associate	90,000,000
Cash		90,000,000

Recognise the investor's share of the associate's profit for the year under the equity method.

Account	Dr (₦)	Cr (₦)
Investment in associate	12,000,000
Share of profit of associate (profit or loss)		12,000,000

Loss recognition ceiling and dividend received

A Nigerian investor holds a joint venture investment with a carrying amount of ₦15,000,000 at the start of the year, no other long-term interests in the joint venture, and no legal or constructive obligation to fund further losses. During the year, the investor's share of the joint venture's loss is ₦22,000,000, and the investor also receives a dividend of ₦3,000,000 from the joint venture during the year, paid before the loss was recognised.

Facts

Workings

First, reduce the carrying amount for the dividend received: 15,000,000 - 3,000,000 = 12,000,000

Investor's share of loss for the year is 22,000,000, but recognition is capped at the remaining carrying amount of 12,000,000, since the investor has no further long-term interests or obligations to fund additional losses.

Unrecognised excess loss: 22,000,000 - 12,000,000 = 10,000,000, disclosed but not recognised, since the investment cannot be reduced below zero without a qualifying obligation.

Closing carrying amount of the investment: nil.

Journal entries

Recognise the dividend received from the joint venture as a reduction of the investment's carrying amount.

Account	Dr (₦)	Cr (₦)
Cash	3,000,000
Investment in joint venture		3,000,000

Recognise the investor's share of the joint venture's loss, limited to the remaining carrying amount of the investment.

Account	Dr (₦)	Cr (₦)
Share of loss of joint venture (profit or loss)	12,000,000
Investment in joint venture		12,000,000

Sources & citations

[S1]IAS 28 Investments in Associates and Joint Ventures — IFRS Foundationaccessed 2026-07-18
[S2]Impairment of equity method investments: navigating IAS 28 and IFRS 9 — KPMG IFRS Instituteaccessed 2026-07-18
[S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
[S4]Changes introduced by CAMA 2020 to business combinations — G. Eliasaccessed 2026-07-18
[S5]Nigeria — Mergers & Acquisitions (Getting the Deal Through, 2017 edition) — Templarsaccessed 2026-07-18
[S6]Nigeria - Corporate - Taxes on corporate income — PwC Worldwide Tax Summariesaccessed 2026-07-18
[S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
[S_TAX2]Nigeria's 2025 Tax Reform Acts Explained: Key Changes — Baker Tilly Nigeriaaccessed 2026-07-18

Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA