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ACCA Applied Knowledge · Financial Accounting · Associates

Which of the following best describes the basis on which an investor must normally conclude that it has significant influence over an investee, making it an associate under IFRS?

Significant influence is presumed when an investor holds 20% to 50% of the voting power in the investee, unless it can be clearly shown otherwise. Above 50% usually means control and a subsidiary, while below 20% presumes no significant influence.

  1. AHolding of 20% to 50% of the voting power, unless it can clearly be shown otherwiseCorrect
  2. BHolding of more than 50% of the voting power
  3. CHolding of any shares at all in the investee
  4. DHolding of less than 20% of the voting power, unless it can be shown otherwise

Explanation

IAS 28 presumes significant influence where the investor holds 20% or more of the voting power, up to the point of control (over 50%), unless it can be clearly demonstrated otherwise. Over 50% normally indicates a subsidiary. Below 20% presumes no significant influence.

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