Significant influence is often presumed when an entity or individual holds more than 20% but less than 51% of the investment in another entity.
- Significant influence enables the entity to make operating and financial decisions for the other entity. The entity may lack total control since the ownership is not above 50%, but the entity can significantly influence corporate decisions.
- Some entities may exert significant influence with investment ownership that is less than 20%.
- Under International Financial Reporting Standards, investors with significant influence account for their investments in the investee using the equity method.
Thus, significant influence is often presumed once an investor owns 20% or more of an investee.
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