Home › CA Final › financialreporting › Ind AS 28 — Associates & JVs: Significant Influence, Equity Method, Exemptions › Kuku Ltd. holds 12% voting rights in Boho Ltd.; …
Kuku Ltd. holds 12% voting rights in Boho Ltd.; Boho's board has 8 members, 2 of whom are appointed by Kuku. Each board member has one vote. Is Boho an associate of Kuku?
AYes — but only if Kuku has veto rights
BNo — fewer than 20% of board seats means no influence
CYes — board representation and relative voting rights at meetings demonstrate significant influence even though Kuku is below 20%
DNo — Kuku's voting rights are below 20%
Answer & Solution
Correct answer: C. Yes — board representation and relative voting rights at meetings demonstrate significant influence even though Kuku is below 20%
Ind AS 28 lists board representation as a key indicator of significant influence. Two of eight directors (25% board representation) combined with 12% voting rights is sufficient to establish significant influence — the 20% presumption is one-way only; significant influence can exist below 20% on facts.
Related questions
An entity loses significant influence over an associate when it loses the power to particiAn investor's interest in an associate is held PARTIALLY through a venture capital organisA wholly-owned subsidiary holds investments in associates. The subsidiary's ultimate parenA Ltd. invests ₹1,00,000 for 25% of B Ltd. (associate). In year 1, B earns ₹10,000 profit,A mutual fund holds 22% of the equity of Company P. Ordinarily P would be presumed an assoAn investor holds compulsorily convertible preference shares (CCPS) in an investee. The CCM Ltd. holds 10% in an investee. 9 other investors each hold 10%. Decisions about most relAn entity holds 10% of an investee and an option to acquire another 15%. The entity does N