Oporto Wines has a 30% holding in Algarve Beaches Company. The remaining 70% of the shares are held by two other companies, which are parties to an agreement between themselves as to the conduct of Algarve’s business. Oporto Wines is represented on the board of Algarve, but all of the decisions are made by directors representing the other two companies. How should this investment be classified by the Oporto Wines Group?
A. An associate
B. A subsidiary
C. A joint arrangement
D. An investment
Based on the information provided, Oporto Wines has a 30% holding in Algarve Beaches Company but does not have the ability to control the operations of Algarve, as the majority shareholders have an agreement dictating the conduct of the business and make all the decisions. Therefore, Oporto Wines' investment in Algarve Beaches Company should be classified as an associate rather than a subsidiary. The correct classification for Oporto Wines Group is:
A. An associate
