Significant influence

Significant influence (relating to interests in joint ventures)

The power to participate in the financial and operating policy decisions of an activity but is not control or joint control over those policies.

Significant influence (relating to investments in associates)

The power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

Significant influence (relating to related party transactions)

The power to participate in the financial and operating policy decisions of an entity, but not control those policies. Significant influence may be exercised in several ways, usually by representation on the board of directors or equivalent governing body but also by, for example, participation in:

  1. the policy making process,
  2. material transactions between entities within an economic entity,
  3. interchange of managerial personnel, or
  4. dependence on technical information.

Significant influence may be gained by an ownership interest, statute, or agreement.

The power to participate in the financial and operating policy decisions of the investee but it is not control or joint control over those policies.

A holding of 20% or more of the voting power (directly or through subsidiaries) will indicate significant influence unless it can be clearly demonstrated otherwise. If the holding is less than 20%, the investor will be presumed not to have significant influence unless such influence can be clearly demonstrated.

The existence of significant influence by an investor is usually evidenced in one or more of the following ways:

  • representation on the board of directors or equivalent governing body of the investee;
  • participation in the policy-making process;
  • material transactions between the investor and the investee;
  • interchange of managerial personnel;
  • provision of essential technical information.

Potential voting rights are a factor to be considered in deciding whether significant influence exists.

A substantial or majority ownership by another investor does not necessarily preclude an investor from having significant influence.

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