How to process Investment in Associates in Oracle E-Business Suite?
When an investor entity exerts significant influence over an investee entity, the latter is called an 'associate' of the former. When the investor has the right to take part in the financial and operating policy decisions of the investee, it is treated as a 'significant influence.' However, the term 'significant influence' does not include 'controlling influence,' in which case, the investee would be called a 'subsidiary' of the investor entity. The investor may acquire this 'significant influence' by holding a 20-50 percent stake in the equity capital of the investee, or through terms and conditions of its investment that provide the entity such rights.
International Accounting Standard 28 prescribes the use of equity accounting method for treatment of investment in associates.
Many organizations manage such investments through spreadsheets. The cumulative accounting impact is booked directly as journals in the general ledger. However, if the volume of such investment transaction is high, it would be risky and inefficient to maintain it in spreadsheets.
Oracle E-Business Suite customers can leverage their existing investment in the financial modules to track and process such transactions. For solution details, please read the white paper 'How to process Investment in Associates in Oracle E-Business Suite'.