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Significant influence in a company


Our company has 17% equity holding in another company plus our CEO is a member of the board of directors of that company. Does this indicate significant influence and we are required to consider this company as an associate?

asked Mar 17, 2013 in IAS 28 - Investments in Associates and Joint Ventures by anonymous
retagged Apr 23, 2013 by Visio

1 Answer

0 votes
As a general rule, where an entity holds 20% or more of the voting power (directly or through subsidiaries) on an investee, it will be presumed the investor has significant influence unless it can be clearly demonstrated that this is not the case.  On the other hand, If the holding is less than 20%,  the entity will be presumed not to have significant influence unless such influence can be clearly demonstrated.

As per IAS 28, representation on the board of directors is an evidence to the existence of significant influence by an entity. Therefore you can treat your investee as an associate and make accounts accordingly.
answered Jul 5, 2013 by Jeremy Level 3 Member (6,160 points)


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