CERTYNEX IFRS ACADEMY

A colleague writes: "IFRS 12 cites 20% and 50%: these are thresholds; an entity holding 15% of the voting rights of another entity therefore has no significant influence judgement to explain." What is the error in this reasoning?

It presents 20% and 50% as thresholds of the standard, whereas they are examples of significant judgements: significant influence can be concluded with less than 20%, based on the facts.

It forgets that the 20% threshold is set by IFRS 12 to presume significant influence, which requires explaining that judgement for any holding below that threshold, regardless of the other facts of the case.

It confuses voting rights with dividend rights, the percentages cited by IFRS 12 concerning the latter in order to assess control.

It ignores that explanation is required just for holdings above 50%, which give control and make significant influence irrelevant.