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Under Ind AS 110, an investor CONTROLS an investee when, and only when, the investor has:
AA majority of the voting rights in the investee — the >50% test alone
BSignificant influence (typically 20% or more of voting rights)
CA controlling interest in the investee's board of directors only
DPOWER over the investee + EXPOSURE/RIGHTS to variable returns + the ABILITY to use power to affect those returns (all three elements)
Answer & Solution
Correct answer: D. POWER over the investee + EXPOSURE/RIGHTS to variable returns + the ABILITY to use power to affect those returns (all three elements)
Para 7 — control requires ALL THREE elements: (a) power over the investee (existing rights to direct relevant activities), (b) exposure or rights to variable returns, and (c) ability to use power to affect those returns. Majority voting alone is necessary but not sufficient (e.g., if voting rights aren't substantive, no control). 20% is the threshold for SIGNIFICANT INFLUENCE under Ind AS 28 (associates), not control.
Related questions
An investor holds 30% of equity AND is also the asset manager of an investment vehicle. ThMr. X (an individual) holds 100% of Company A. Mr. X is not a corporate entity and does noUnder Ind AS 110, PROTECTIVE RIGHTS are:Under Ind AS 110, SUBSTANTIVE RIGHTS confer power if the holder has the PRACTICAL ABILITY A Ltd. is the asset manager of Fund X (a venture capital fund). A holds 10% of Fund X's unA Ltd. and B Ltd. set up C Ltd. to build and operate a toll road. A Ltd. constructs (2 yeaFive investors each own 20% of Entity Z and each has one seat on Z's seven-member board. SUnder Ind AS 110, an investor has POWER over an investee through: