What are associate costs?

Associate costs are expenses incurred in relation to an associate company. An associate company is a business in which a parent company holds a significant influence, typically defined as owning between 20% and 50% of the voting shares. These costs aren't directly controlled by the parent company in the same way as its subsidiaries, but they still have an impact on the parent's financial statements.

Associate costs can include:

* Share of profits or losses: The parent company reports its share of the associate's net income or net loss on its own income statement. This isn't a direct cost, but rather a reflection of the parent's investment.

* Administrative costs related to the investment: These could include legal fees, accounting fees, and travel expenses incurred in managing the investment in the associate.

* Costs of monitoring the associate's performance: This may involve staff time spent reviewing financial statements, attending meetings, and providing guidance.

* Transaction costs: Costs associated with buying or selling shares in the associate.

It's important to note that associate costs are accounted for differently than costs associated with subsidiaries. Unlike subsidiaries where the parent company consolidates the entire financial statements, an associate's financial information is accounted for using the equity method, reflecting only the parent's share of the associate's performance. Therefore, the "costs" are more a reflection of the parent company's share of the associate's performance and the related administrative burden than direct expenses.