Significant influence
In this session, you'll learn what significant influence means and how to identify it for accounting purposes. We'll explore the key distinction between associates and subsidiaries, then work through the practical tests that determine whether an investor has significant influence over another entity.
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In this lesson
- 0:00 What is significant influence?
- 1:07 Shareholding thresholds explained
- 1:32 Evidence of significant influence
- 2:03 Accounting for associates overview
About this lesson
Significant influence is defined by IAS 28 as the power to participate in financial and operating policy decisions without having control. If you hold between 20% and 50% of an investee (directly or indirectly), significant influence is presumed. Below 20%, there's a presumption of no significant influence unless you can demonstrate otherwise through evidence like board representation, participation in policy decisions, material transactions, or interchange of managerial personnel. Once significant influence is established, you'll account for the investment using the equity method. This session equips you with the framework to correctly classify investments and apply the right accounting treatment—essential knowledge for Financial Reporting and Strategic Business Reporting papers.
Duration: 2m
Transcript
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