Decision rules and voting patterns

Learning objectives

• Analyse a decision-making rule (qualified majority, unanimity, veto right) to determine which combinations of parties can make decisions.L2, L3
• Determine, from the voting rights given in a case, whether a combination of parties reaches the required majority.L2

Normative references

• IFRS 11 §8A party to an arrangement first assesses whether the contractual arrangement gives all the parties, or a group of the parties, control of the arrangement collectively, i.e. whether they must act together to direct the activities that significantly affect the returns of the arrangement (relevant activities). Joint control then exists only if decisions about those activities require the unanimous consent of the parties that collectively control (para. 9); the assessment of collective control is based on the definition of control in IFRS 10 (B5).
• IFRS 11 §B8When the contractual arrangement requires a minimum proportion of the voting rights for decisions about the relevant activities and that proportion can be achieved by more than one combination of parties, the arrangement is not a joint arrangement unless it specifies which parties (or combination of parties) are required to agree unanimously; application examples 1 to 3 illustrate the principle (a single possible combination: joint control; several unspecified combinations: no joint arrangement).

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

2 questions

• Pic SA, Roc SA and Sol SA hold 34%, 33% and 33% respectively of the voting rights of Atlas SA. Under the agreement, decisions about the relevant activities are taken at 66% or more of the voting rights (decision rule: case data). Every combination of two parties reaches this threshold. What is concluded about joint control of Atlas?L2
• Three parties hold 40 %, 35 % and 25 % of the voting rights of an arrangement respectively. Decisions about the relevant activities require at least 65 % of the voting rights, and the arrangement does not specify any combination of parties whose unanimous consent would be required (case facts). Is the arrangement a joint arrangement under IFRS 11?L2