How is 'significant influence' defined in the context of associates?

How is 'significant influence' defined in the context of associates?

• A. Exclusive control over an investee
• B. Power to make decisions without limitations
• C. Power to participate in financial and operational decisions but not full control
• D. A voting power exceeding 50%

Answer: (C)

In the context of associates, 'significant influence' is defined as the power to participate in the financial and operational decisions of the investee, without having full control over those decisions. This concept is crucial when determining whether an investment qualifies as an associate under the International Financial Reporting Standards (IFRS). Associates are typically characterized by the investor holding an ownership interest of 20% to 50% in the associate, which provides the investor with a significant degree of influence, but not outright control. The ability to participate in decisions means that the investor can affect the direction and decisions of the investee, such as its financial strategies or operational policies, but does not have unilateral decision-making authority. This differentiates significant influence from control, which would allow the investor to dictate all decisions regarding the investee’s operations. The other options do not align with the definition of significant influence. Exclusive control would imply that the investor has total authority over the investee, which denotes a controlling interest rather than merely significant influence. Power to make decisions without limitations also suggests a level of control that exceeds what is considered significant influence. Lastly, a voting power exceeding 50% clearly indicates control rather than influence, as it suggests the investor can make decisions independently without needing

In the context of associates, 'significant influence' is defined as the power to participate in the financial and operational decisions of the investee, without having full control over those decisions. This concept is crucial when determining whether an investment qualifies as an associate under the International Financial Reporting Standards (IFRS).

Associates are typically characterized by the investor holding an ownership interest of 20% to 50% in the associate, which provides the investor with a significant degree of influence, but not outright control. The ability to participate in decisions means that the investor can affect the direction and decisions of the investee, such as its financial strategies or operational policies, but does not have unilateral decision-making authority. This differentiates significant influence from control, which would allow the investor to dictate all decisions regarding the investee’s operations.

The other options do not align with the definition of significant influence. Exclusive control would imply that the investor has total authority over the investee, which denotes a controlling interest rather than merely significant influence. Power to make decisions without limitations also suggests a level of control that exceeds what is considered significant influence. Lastly, a voting power exceeding 50% clearly indicates control rather than influence, as it suggests the investor can make decisions independently without needing