ACCA Applied Knowledge · Financial Accounting · Associates
Under IFRS as examined in ACCA Financial Accounting, which of the following best indicates that an investor has significant influence over an investee?
A 35% voting holding with board representation indicates significant influence, because holding 20% or more of votes is presumed to give influence and board seats confirm participation in policy decisions. A 55% holding with control creates a subsidiary, and small holdings below 20% do not indicate influence.
- AHolding 35% of the voting rights and having a seat on the boardCorrect
- BHolding 8% of the voting rights and receiving an annual dividend
- CHolding 55% of the voting rights and appointing all directors
- DHolding 15% of the voting rights as a short-term trading investment
Explanation
Significant influence is the power to participate in financial and operating policy decisions. It is presumed with 20% or more of the votes, and board representation supports it. A 55% holding with control makes a subsidiary, while 8% and 15% holdings are below the 20% presumption with no other evidence of influence.
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