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RS Ltd. (pharma) holds 15% of XY Ltd. (a packaging maker). 90% of XY's output is sold to RS. Does RS have significant influence over XY?
AYes — but only if the prices charged are below market
BNo — 15% < 20% and no board representation noted
CYes — XY is economically dependent on RS for its very business, demonstrating significant influence despite the 15% holding
DNo — buyer-seller relationships are irrelevant to Ind AS 28
Answer & Solution
Correct answer: C. Yes — XY is economically dependent on RS for its very business, demonstrating significant influence despite the 15% holding
Material transactions between the entity and its investee (especially economic dependency) are an Ind AS 28 indicator of significant influence. RS effectively can dictate XY's operations through its purchasing power — significant influence exists below the 20% line.
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