Question

What is the control ? Analysis criteria used for determining control under IAS ?

Answer 1

An investor is said to have control over investee if and only if the investor has all the following:

1. Power over the investee;

2. Exposure, or rights, to variable returns from its involvement with the investee; and

3. The ability to use its power over the investee to affect the amount of the investor's returns.

The above definition is very wide and control assessment does not depend only on voting rights instead it depends on following as well:

a. Potential voting rights;

b. Rights of non-controlling shareholders; and

c. Other contractual right of the investor if these are substantive in nature.

Analysis criteria used for determining control:

1. More than 50% voting rights;

2. Power to appoint and remove board of directors;

3. Investor have currently exercisable potential voting rights.

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