Accoutning for associates

28.3 Explain significant influence and contrast it with control

AASB 1016 defines significant influence as ¡¥the capacity of an entity to affect substantially (but not control) either, or both, of the financial and operating policies of another entity¡¦. Common indicators as suggested by the standard that indicate significant influence over another entity, are;
„« Holding 20 percent or more of the voting power in the associate but not greater than 50 percent as this would be control
„« Representation on the associates board of directors
„« Extent of the materiality of inter-company transactions
„« Economic or technological dependencies
„« Restrictions on the investee¡¦s ability to make distribution to owners
„« The investment must be held long-term for it to give rise to significant influence and establish investor-associate relationship
(The above points are just a suggestion by the standard and all may not apply to every case...