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ACCA P2 Basic group structure: Subsidiary, Associate
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Do other situations still valid if the investor only has a really little percentage of the shares in the company? e.g. owns 5% but have 2 directors on the board, etc. What is the threshold of the share percentage in conjunction of other situations to enable to count the company as an associate?
Shouldn’t the power, ability, PR and other factors of the two directors in question be taken in to account? Because if they are not much influential then this investment might just be an Investment on a balance sheet?
For the 20 to 50 % in the case of Associate, is the 20% inclusive or not?
more than or equal to 20% less than or equal to 50%
Thank you
See the percentage really doesn’t matter. What matters is ‘Significant influence’. If u have significant influence (like having 2 Directors in the Board) then it will get covered under ASSOCIATE. If the question would have been silent about the directors you could have assumed that 19.9% influence is not ‘Significant Influence’.
Thank you for the lecture. You mentioned that one of the situations where an entity can be considered an associate is where the one organisation provides essential technical information. How do we differenciate that in the case of advisory and consulting firms who offer a great deal of technical information but do not consider their clients as associates?
i don’t know how?
these firms typically do not own shares in their clients.
Dear sir,
1. Can we define an associate as being a company on which we have significant influence (we have the power to participate in the financial and operating policy decisions of that company)?
2. Can we define a subsidiary on which we have control (we have the power to direct its operating and financing decisions)?
Thanks,
Laiq
Correct