Home › CA Final › financialreporting › principalagentdetermination › Under Ind AS 110, when one investor has POWER ov…
Under Ind AS 110, when one investor has POWER over relevant activities but ANOTHER investor has greater EXPOSURE to variable returns (yet no power), the controlling investor is:
AThe one with power — power + any exposure to variable returns + ability to use power = control; greater pure exposure without power does NOT establish control
BThe investor with greater exposure to variable returns — variable returns dominate
CNeither — power and returns must be held by the same investor; otherwise no one controls
DWhichever investor has greater economic interest in dollar terms
Answer & Solution
Correct answer: A. The one with power — power + any exposure to variable returns + ability to use power = control; greater pure exposure without power does NOT establish control
Control requires the conjunction of (a) power, (b) exposure to variable returns, and (c) ability to use power. The investor with power who has SOME exposure to returns (even modest) and can use power to affect those returns controls — even if another investor has greater absolute exposure but no power. (Compare with B57 + B70 — exposure alone is insufficient; the lender example in B70.)
Related questions
Under Ind AS 110's de-facto agent assessment, OTHER parties that might act as de-facto ageUnder Ind AS 110, a DEEMED SEPARATE ENTITY ("SILO") is treated as a separate investee for Under Ind AS 110, REPUTATIONAL RISK alone (i.e., a sponsor's incentive to step in to proteUnder Ind AS 110, a parent and its fellow subsidiary together hold voting rights in an invUnder Ind AS 110, an investee is funded primarily by short-term debt to third parties, secUnder Ind AS 110, an asset manager has wide decision-making authority, market-based 1% AUMUnder Ind AS 110, an asset manager has wide decision-making authority, receives 1% AUM + 2Under Ind AS 110, INVESTEE's KMP being current or previous employees of the INVESTOR is a: