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Sir, the above mentioned standard defines control as, “the power to govern financial & operational policy decisions of an investee so as to benefit from its activities”.
Control also depicts, owning more that 50% of the ordinary shares. But sir, notwithstanding that there is a 50% ownership and greater, if the investor “cannot” exercise the following:
1) Cannot exercise power over the investee
2) Does not have any right or exposure to variable returns
3) Cannot use its power to influence the amount of its returnsAre we still require to include the investee as a subsidiary? If no, what will be the method of accounting for this investment if not at full consolidation?
Hi,
If we have the power to direct the activities of the entity then it is a subsidiary and it is consolidated. Normally if we have greater than 50% ownership then we have control, and it would be rare that we wouldn’t have the power ti direct with this amount of holding.
The scenarios you mention above tend to be more relevant when we own less than 50% but still have the power to direct the activities based on one or more of the criteria above.
Thanks
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