The rebuttable 20% presumption

Learning objectives

• Explain that holding 20 per cent or more of the voting power gives rise to a presumption of significant influence, and that this presumption can be rebutted, as can the presumption of no influence below 20 per cent.L1, L2
• Justify, from the facts of a case, that a presumption is rebutted.L2

Normative references

• IAS 28 §5If the investor holds, directly or indirectly (for example through subsidiaries), 20 per cent or more of the voting power of the investee, significant influence is presumed, unless it can be clearly demonstrated that this is not the case; below 20 per cent, it is presumed not to exist, unless such influence can be clearly demonstrated; a substantial or majority ownership by another investor does not necessarily preclude significant influence.

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

5 questions

• If the investor holds, directly or indirectly, 20% or more of the voting power of the investee, significant influence is presumed, unless it can be clearly demonstrated that this is not the case.L1
• Alba SA holds 22% of the voting power of Brise SA. Case convention: the facts clearly demonstrate that Alba has no ability to participate in Brise's financial and operating policy decisions. What is concluded about significant influence?L2
• Alba SA holds 18% of the voting power of Brise SA, while another investor holds 55%. Alba has a representative on Brise's board of directors (case data). Write a short note concluding on Alba's significant influence, distinguishing case facts, rule and professional judgement.L2
• Alba SA participates in a joint venture without exercising joint control. It holds 25% of the entity's voting rights and nothing in the case rebuts the presumption of significant influence (facts of the case). How does Alba account for its interest?L3
• Explain how a party to a joint venture accounts for its interest depending on whether or not it has joint control, stating the role of significant influence.L3