AASB 128 requires an investor to recognise an investment in an associate by applying the equity method in its consolidated financial statements and at cost or in accordance with Accounting Standard AASB 139 Financial Instruments: Recognition and Measurement in its own separate financial statements.

If the investor is not required to prepare consolidated financial statements, AASB 128 requires recognition of an investment in an associate by applying the equity method in its own separate financial statements.

This Guidance Statement does not apply to the audit of investments in associates held by venture capital organisations, mutual funds, unit trusts and similar entities including investment-linked insurance funds when they are measured at fair value through profit and loss or are classified as held for trading and accounted for in accordance with AASB 139 or are an investment classified as held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations.

This Guidance Statement discusses audit implications for auditors who do not have direct access to information from an associate of an investor and which may restrict the auditor’s ability to gather sufficient appropriate audit evidence.

The audit implications and audit responses included in this Guidance Statement may apply to obtaining audit evidence for Joint Ventures that may be equity accounted for under Accounting Standard AASB 131 Interests in Joint Ventures.