ACCA Applied Knowledge · Financial Accounting · Associates
Which of the following, on its own, would be the strongest indication that an investor does NOT have significant influence over an investee in which it holds 30% of the voting rights?
Being unable to obtain timely financial information from the investee suggests the investor lacks significant influence despite its 30% holding. The other options, such as board representation, policy participation and material transactions, are all indicators that significant influence exists.
- AThe investor is unable to obtain timely financial information from the investee for equity accountingCorrect
- BThe investor has a representative on the investee's board
- CThe investor participates in policy-making decisions such as dividend policy
- DThe investor has material transactions with the investee
Explanation
Board representation, participation in policy decisions and material transactions are all indicators of significant influence. Inability to obtain extensive information is an indicator of lack of influence, which can rebut the 20% presumption.
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