i) Significant influence
Where an investor holds directly or indirectly, 20% or more of the voting power of the investee, it is presumed to have significant influences, unless it can be clearly demonstrated otherwise. The existence of significant influence is usually evidenced in one or more of the following ways:
- Representation on the board of directors.
- Participation in policy-making process, including participation in decisions about dividends.
- Material transactions between investor and investee.
- Interchange of managerial personnel.
- Provision of essential technical information.
ii) The equity method may be precluded when:
- The investment is classified as held for sale.
- The parent company is exempted from use of equity method.
- The investment is a wholly owned subsidiary, or it is a partially owned subsidiary of another entity whose owners do not object to the investor not applying the equity method and the following also apply:
- The investor's debt or equity instruments are not traded in a public market.
- The investor did not file, nor is it in the process of filing its financial statements with the stock exchange for purposes of issuing instruments in a public market.
- The intermediate or ultimate parent of the investor produces consolidated financial statements which are available for public use and comply with International Finance Reporting Standards.
Wilfykil answered the question on February 12, 2019 at 08:30
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