NBAA CPA Final Practice Questions - NBAA Certified Public Accountant (CPA) Final Level Exam

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In preparing consolidated financial statements under IFRS 10, a parent company possesses 45% of the voting rights of an investee. The remaining voting rights are widely dispersed among thousands of small shareholders, none of whom holds more than 1% individually. How should the parent assess control?

The parent does not have control because it holds less than a 50% majority of voting rights. The parent must have a formal voting agreement with other shareholders to assert control. The parent has de facto control because its holding is dominant relative to the dispersion of the other shareholdings. Control cannot be determined until a shareholder vote actually takes place at the annual general meeting.

Correct Answer:

The parent has de facto control because its holding is dominant relative to the dispersion of the other shareholdings.

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