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CA Intermediate · Advanced Accounting · AS 23 Accounting for Investments in Associates in Consolidated Financial Statements

Sundaram Textiles Ltd. holds equity shares in four unrelated companies. It has no board representation in any of them and no other evidence to rebut or support influence. Under AS 23, in which investee is significant influence presumed to exist, making it an associate?

Significant influence is presumed in Company S. AS 23 presumes it when an investor holds 20% or more of the voting power, directly or indirectly, unless clearly demonstrated otherwise. Holdings of 15%, 18% and 19.9% are below the threshold, and no other indicators of influence are given.

  1. ACompany P, where it holds 15% of the voting power
  2. BCompany Q, where it holds 18% of the voting power
  3. CCompany R, where it holds 19.9% of the voting power
  4. DCompany S, where it holds 20% of the voting powerCorrect

Explanation

AS 23 presumes significant influence when the investor holds, directly or indirectly, 20% or more of the voting power of the investee, unless it is clearly shown otherwise. Only the 20% holding meets this threshold. The 15%, 18% and 19.9% holdings fall below it, and nothing else in the facts indicates influence.

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