The relevant activities

Learning objectives

• Identify the relevant activities of an investee (those that significantly affect its returns).L1, L2
• Analyse who directs the relevant activities when several decisions are made at different times or by different parties.L2

Normative references

• IFRS 10 §10Power exists when the investor has existing rights that give it the current ability to direct the relevant activities, i.e. the activities that significantly affect the investee's returns. Para. 14 establishes that an investor that holds only protective rights does not have power.
• IFRS 10Appendix A (defined terms): consolidated financial statements (the group presented as a single economic entity), control of an investee, decision maker (principal or agent), group, investment entity, non-controlling interest, parent, power, protective rights, relevant activities (those that significantly affect returns), removal rights and subsidiary; some terms (associate, joint venture, significant influence, related party) are taken from other Standards.

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

3 questions

• In the analysis of power, what is meant by the "relevant activities" of an investee?L1
• Which statements about power and relevant activities are correct? More than one answer is possible.L2
• The Zénith fund selects and sells investments, and entrusts its administration to Frêne SA for a fixed fee. Orme SA holds the current right to decide the selection and sale of the investments. Write a short note identifying Zénith's relevant activities and the party that has the ability to direct them, distinguishing case facts, rule and professional judgement.L2