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Equity Method (Associates / Joint Ventures)

Under IAS 28, investments where the group has significant influence but not control are accounted for using the equity method rather than full consolidation. The model gold_equity_method_associates (PRD-14) generates the equity-method journal entries that flow into the consolidated trial balance.

Which investments qualify

An entity is treated as an associate purely by its consolidation_method in the consolidation_groups seed — not by an ownership-percentage band computed in code:

from {{ ref('consolidation_groups') }} as cg
where cg.consolidation_method = 'equity'

So the qualification rule is a seed-driven flag. The model comment documents the intended scope as 20–50% ownership (significant influence), but the SQL filters strictly on consolidation_method = 'equity'. Entities flagged full go through normal line-by-line consolidation instead.

The consolidation_groups.csv seed provides per-entity ownership and currency:

ColumnUsed as
consolidation_groupGroup the entity rolls up into
data_area_idEntity / company code
ownership_pctGroup share, as a whole number (e.g. 75)
reporting_currencyGroup reporting currency
consolidation_methodfull or equity — selects the accounting treatment

The seed rows shipped today (GROUP_CORP, AMG) are all full, so the equity-method model produces no rows until an equity entity is added.

Share of profit (equity income)

The model computes the group's share of the associate's net income for the period.

  1. Net income per entity/period. It joins gold_trial_balance to silver_main_accounts and keeps only P&L accounts (is_pnl = 1), then sums period_net_amount:

    sum(tb.period_net_amount) as net_income
    ...
    where ma.is_pnl = 1
    group by ee.consolidation_group, tb.data_area_id, tb.fiscal_year,
    tb.fiscal_period, ee.reporting_currency, ee.ownership_pct

    is_pnl is set in silver_main_accounts from the account type, and period_net_amount is the period movement measure aggregated in gold_trial_balance.

  2. Equity income. The ownership percentage is converted to a fraction (ownership_pct / 100.0) in the equity_entities CTE, then applied:

    equity_income_amount = net_income × ownership_pct

This is a single-period share of profit — there is no opening-balance roll-forward in the SQL.

Carrying amount of the investment

The model comment describes the carrying amount as opening_investment + equity_income - dividends, but the implemented logic only emits the movement in the investment, not a running balance. For each qualifying entity/period it produces a paired entry equal to the equity income:

AccountNameAmountMeaning
EQ_INCOMEEquity method - share of profitequity_income_amountIncome recognition (P&L)
EQ_INVESTEquity method - investmentequity_income_amountInvestment carrying-amount movement (BS)

Both lines are emitted only when the amount is material:

where abs(equity_income_amount) > 0.01

EQ_INCOME and EQ_INVEST are reserved account codes (they do not exist in the chart of accounts). Each entry carries:

  • adjustment_type = 'equity_method'
  • a deterministic journal_id of the form EQ_<data_area_id>_<fiscal_year>_P<fiscal_period>

Dividends and a true opening/closing investment balance are not modelled in this version.

How it feeds the consolidated TB

gold_fully_consolidated_tb unions the equity-method rows in as Layer 5 alongside entity balances, IC eliminations, CTA, top-side adjustments, and acquisition/disposal adjustments:

{# Layer 5: Equity method entries (PRD-14) #}
equity_method as (
select
consolidation_group, data_area_id, fiscal_year, fiscal_period,
main_account, account_name,
{{ dim_empty_strings() }},
reporting_currency, amount,
'equity_method' as adjustment_type, journal_id
from {{ ref('gold_equity_method_associates') }}
)

The EQ_INCOME and EQ_INVEST lines therefore appear in the unified consolidated trial balance carrying adjustment_type = 'equity_method', distinguishable from the line-by-line entity rows of fully consolidated subsidiaries.

Inputs at a glance

SourceRole
consolidation_groups (seed)Selects equity entities; supplies ownership_pct, reporting_currency
gold_trial_balancePer-entity/period balances providing period_net_amount
silver_main_accountsis_pnl flag to isolate P&L accounts for net income
gold_fully_consolidated_tbConsumer — folds entries in as Layer 5

See gold_equity_method_associates.sql for the full implementation.