12. Investments in joint ventures and associates

The amounts recognised in the balance sheet are as follows:


All figures in £ millions	2017		2016
Associates		395		1,245
Joint ventures		3		2

Total		398		1,247

The amounts recognised in the income statement are as follows:


All figures in £ millions	2017		2016
Associates		77		98
Joint ventures		1		(1	)

Total		78		97

Investment in associates

The Group has the following material associates:

Principal
place of
business

Ownership
interest

Nature of
relationship

Measurement
method

Penguin Random House Ltd

UK/Global

See below

Equity

Penguin Random House LLC

See below

Equity

On 1 July 2013, Penguin Random House was formed, upon the completion of an agreement between Pearson and Bertelsmann to merge their respective trade publishing companies, Penguin and Random House, with the parent companies owning 47% and 53% of the combined business respectively. On 5 October 2017, Pearson sold a 22% stake in Penguin Random House to Bertelsmann, retaining a 25% share (see note 31 for more information on disposal of associates). Pearson owns its 25% interest in Penguin Random House via 25% interests in each of the two entities listed in the table above. Despite the separate legal structures of the two Penguin Random House entities, Pearson regards Penguin Random House as one combined global business. Consequently, Pearson discloses Penguin Random House as one single operating segment and presents disclosures related to its interests in Penguin Random House on a combined basis.

The shareholder agreement includes protective rights for Pearson as the minority shareholder, including rights to dividends. Management considers ownership percentage, Board composition and the additional protective rights, and exercises judgement to determine that Pearson has significant influence over Penguin Random House and Bertelsmann has the power to direct the relevant activities and therefore control. Following the transaction in 2017 the assessment of significant influence has not changed. Penguin Random House does not have a quoted market price.

The summarised financial information of the material associate is detailed below:


	2017			2016
All figures in £ millions	Penguin Random House			Penguin Random House
Assets
Non-current assets		1,048			1,267
Current assets		1,758			1,587
Liabilities
Non-current liabilities		(859	)		(394	)
Current liabilities		(1,579	)		(1,074	)

Net assets		368			1,386

Sales		2,693			2,620

Profit for the year		171			209
Other comprehensive expense		(60	)		(14	)

Total comprehensive income		111			195

Dividends received from associate in relation to profits		146			131
Re-capitalisation dividends received from associate		312			—

The information above reflects the amounts presented in the financial statements of the associate, adjusted for fair value and similar adjustments. The tax on Penguin Random House LLC is settled by the partners. For the purposes of clear and consistent presentation, the tax has been shown in the associate line items in the consolidated income statement and consolidated balance sheet, recording the Group’s share of profit after tax consistently for the Penguin Random House associates.

A reconciliation of the summarised financial information to the carrying value of the material associate is shown below:


	2017			2016
All figures in £ millions	Penguin Random House			Penguin Random House
Opening net assets		1,386			1,206
Exchange differences		(18	)		179
Profit for the year		171			209
Other comprehensive expense		(60	)		(14	)
Dividends, net of tax paid		(1,167	)		(194	)
Tax adjustments in relation to disposals		56			—

Closing net assets		368			1,386
Share of net assets		92			651
Goodwill		296			589

Carrying value of associate		388			1,240

Information on other individually immaterial associates is detailed below:


All figures in £ millions	2017		2016
Profit for the year		7		—

Total comprehensive income		7		—

Transactions with material associates

The Group has loans to Penguin Random House which are unsecured and interest is calculated based on market rates. The amount outstanding at 31 December 2017 was £46m (2016: £33m). The loans are provided under a working capital facility and fluctuate during the year. The loan outstanding at 31 December 2017 was repaid in its entirety in January 2018.

The Group also has a current asset receivable of £19m (2016: £21m) from Penguin Random House and a current liability payable of £3m (2016: £nil) arising from the provision of services. Included in other income (note 4) is £3m (2016: £4m) of service fees. In addition, the Group will receive a further re-capitalisation dividend of £49m in April 2018, which was triggered by the Group’s decision to sell a 22% stake in Penguin Random House in 2017.

Investment in joint ventures

Information on joint ventures, all of which are individually immaterial, is detailed below:


All figures in £ millions	2017		2016
Profit/(loss) for the year		1		(1	)

Total comprehensive income/(expense)		1		(1	)