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| Subject: Identify AssociatedERG owns 19.9%Card Etc AG (equity accounted once reaching 20%and over) | |
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Author: anonymous |
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Date Posted: 19:33:38 10/06/02 Sun In reply to: anonymous 's message, "Tax effect acc ERG owns 19.9%Card Etc AG (equity accounted once reaching 20%and over)" on 19:31:02 10/06/02 Sun Topic 5 Securities Institute of Oz. 6.2 "Identifying associated entities" ------------------------------------------------------------ 6.2 Identifying associated entities. ------------------------------------------------------------ Signifcant influence is defined by AASB 1016 (paragraph 9) as: ------------------------------------------------------------ i) The capacity of an entity to ii)...affect subtantially but not control iii)....the financial and/or operating policies of an investee. ------------------------------------------------------------ Determination of whether or not significant influence exists, depends upong substance rather than form. Significant influence normally stems from the investors voting power in the investee. In deciding whether the investors voting power gives rise to significant influence over the investee, it is necessary to consider the distribution of the balance of voting power. ------------------------------------------------------------ The influence of the investor will usually vary if the balance of the voting power is held by a few relatively large shareholders compared with being distributed over a large number of relatively small holdings. In the latter there is more likiehood of significant influence over the former. However if the few relatively large shareholders are working co--operatively, each might have significant influence. ------------------------------------------------------------ Some of the factors which would normally indicate the existence of significant influence by one entity over another entity include (paragraph 9.16) a) 'reprsentation on the investee's board of directors' b) 'participation in decisions on the distribution or retention of the investee's profits' c) 'participation, in other ways, in policy making decisions of the investee'. ------------------------------------------------------------ Where an investor owns from 20% to 50% of the voting power in an associated company, this will lead to a presumption that the investor has significant influence to the absence of the contrary. If an investor owns more than 50%, then control is presumed is presumed to exist and consolidation is required. If an investor owns less than 20%, then it is presumed significant influence does not exist unless there is evidence to the contrary. ------------------------------------------------------------ However, the 20% is a guideline. Significant influence might not exist when owning more than 20% or might exist when owning less than 20% ------------------------------------------------------------ [ Next Thread | Previous Thread | Next Message | Previous Message ] |