Definition of significant influence

Learning objectives

• Explain that significant influence is the power to participate in the financial and operating policy decisions of the investee without control or joint control.L1
• Identify a situation of significant influence from the facts of a case.L1

Normative references

• IAS 28 §3Definitions: an associate is an entity over which the investor has significant influence; significant influence is the power to participate in the investee's financial and operating policy decisions without control or joint control of those policies; a joint venture is a joint arrangement in which the parties with joint control have rights to the net assets; under the equity method the investment is first recognised at cost and then adjusted for the post-acquisition change in the investor's share of the investee's net assets; the investor's profit or loss includes its share of the investee's profit or loss, and its other comprehensive income its share of the investee's other comprehensive income.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• What is the significant influence of an investor over an investee?L1
• Which statements about the associate, significant influence and the joint venture are correct? More than one answer is possible.L1
• 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?L1