CERTYNEX IFRS ACADEMY

A colleague writes: "Alba SA can have significant influence over Brise SA only if it alone decides its financial and operating policies." What is wrong with this reasoning?

It overlooks that significant influence requires a contractually agreed sharing of control of Brise with other parties, which then hold rights to Brise's net assets.

It wrongly holds that significant influence requires less than 20% of the voting rights, a higher percentage leading to control.

It equates significant influence with the power to decide alone, whereas it consists of participating in decisions without controlling them; deciding alone would be control.

It confuses significant influence and the equity method: significant influence is a method of accounting for the investment.