Examples of significant judgements

Learning objectives

• Analyse a case of control without a majority of the voting rights, or of significant influence with less than 20 per cent, to identify the judgement to be explained.L2, L3
• Justify the nature of the explanation provided about a significant judgement.L3

Normative references

• IFRS 12 §9Examples of significant judgements: concluding that the entity does not control another entity even though it holds more than half of the voting rights, or that it controls another entity even though it holds less than half; determining whether the entity is a principal or an agent; concluding that it does not have significant influence even though it holds 20 per cent or more of the voting rights, or that it has significant influence even though it holds less than 20 per cent.

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

3 questions

• 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?L2
• Sirène SA holds 45% of the voting rights of Mer SA; the other rights are spread among many small holders, none of whom holds more than 3% (case facts). Based on these facts, Sirène has concluded that it controls Mer. What does IFRS 12 ask of Sirène?L2
• Alma Group holds 48% of the voting rights of Brio SA, the rest being dispersed among many holders; Alma has concluded that it controls Brio. It also holds 15% of Cime SA, sits on its board and takes part in its financial and operating policy decisions; Alma has concluded that it has significant influence over Cime (case facts, percentages included). Write a short note stating the judgements to be explained and the nature of the explanation to provide, distinguishing rule, case facts and professional judgement.L3