Question

Which of the following statements are correct?

i) An investor controls an investee when the investor is exposed to, or has rights to, variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

ii) Power arises from rights such as voting rights.

iii) Variable return of the investee are as a result of the investees performance, which can be both positive or negative.

iv) Control over the investee includes the investors ability to use its power to affect its returns from it involvement with the investee.

Select one:

a. iii and iv only

b. 1 and 11 and iii and iv

c. i and iii and iv only

d. i and ii and iii only

Answer 1

Shareholders does not have controlling powers and they are only having the voting power so, investor does not control the company when he is exposed to variable return and power arising from rights such as voting rights and variable return of of company are result of performance of the company which can either be positive or negative.

All the other statements are false.

Correct answer will be option (B) I,II, III AND IV.