Controlling influent while holding less than or equal 50%

CFA Level II FRA
#1

When u see cotrolling influent do u consolidate it right away even u hold less than the required amount i.e. less than 50%?

I see some questions did that but today i come across a question that state that i should use equity method

#2

Use EQUITY method, when

(1) you only have significant influence over the operating and finance decisions

(2) you hold 20-50% of the shares

*** Factor (1) overrides factor (2) but factor (2) helps you to determine.

Use Consolidation method, when

(1) you have CONTROL over the operating and finance decisions

(2) you hold >50% of the shares

#3

What’s ‘controlling influent’? you can either exercise control, in which case you consolidate, or significant influence, in which case you apply the equity method. Control may exist even if you hold less than 50% of the share capital.

regards

#4

Pretty sure the question will indicate which scenario exists,

#5

So if i hold 10% but i have significant influence then what do i do? Equity method and dont consider it as investment in financial asset but incestment in associate instead?

#6

Yes, if you are told that you exert significant influence , then treat it as an associate and apply the equity method.

#7

Ok thx

#8

Controlling use acquisition method even if less than 50