ACCA FA · Chapter 13 · Question 8 of 12
An investor holds 35% of the voting shares of an entity and has significant influence, but not control, over it. How should the investment be accounted for in the consolidated financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Using the equity method, as an associate
Explanation
Significant influence is the power to participate in financial and operating policy decisions without controlling them, and is presumed for holdings of 20% to 50%. Such an investee is an associate, which IAS 28 requires to be accounted for using the equity method rather than full consolidation.
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