Find the FASB rules that define when one company is deemed to have control over a...

Find the FASB rules that define when one company is deemed to have control over a second one. Also find the rule that says at what level of stock ownership an investor is presumed to have significant influence over an investee.

Expert Solution

FASB Topic 810- Consolidation covers control and significant influence.

Control of an entity is defined as the ability to direct the policies and management that guide the ongoing activities of another entity so as to increase the benefits and limit the losses from those activities. It involves two essential characteristics: a parent's decision-making powers that are not shared with others and a parent's ability to use that power to increase the benefits it derives and limit the losses it suffers from the activities of its subsidiary.

Significant influence is the power to participate in the operating and financial policy decisions of an entity; it is not control over those policies. The concept is used in international financial reporting standards. If an investor holds at least 20 percent of the voting power of an investee, the investor is presumed to have significant influence. The assumption of influence can be reversed through a clear demonstration to the contrary.

ekkarill92 answered 1 year ago

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