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ACCA Applied Knowledge · Financial Accounting · Associates

Which of the following best describes the basis on which an investor normally presumes it has significant influence over an investee under IAS 28?

Significant influence is presumed when an investor holds 20% or more of the voting power in the investee, unless it can clearly be shown otherwise. Holding over 50% normally gives control, making the investee a subsidiary, so that threshold relates to subsidiaries rather than associates.

  1. AHolding 20% or more of the voting power, unless it can be clearly demonstrated otherwiseCorrect
  2. BHolding more than 50% of the voting power
  3. CHolding 10% or more of the voting power, unless demonstrated otherwise
  4. DHaving any long-term loan to the investee

Explanation

IAS 28 presumes significant influence where the investor holds 20% or more of the voting power directly or indirectly, unless it can be clearly shown that this is not the case. More than 50% usually indicates control, which leads to a subsidiary rather than an associate.

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