International Accounting Standard (IAS) 28 states that the ability to exercise significant influence over the operating and financial policies of an investee company is the sole criterion of requiring the application of the equity method. List three conditions of influence and explain how each would indicate the presence of influence. Solution the following three cosnditions may be deemed to indicate the presence of infuence 1) Representation of investor on the board of directors of the investee- the board of directors act on behalf of the shareholders and looks after the day to day business of the company so if the investor has a say in board of directors it indicates presence of influence 2) investor participation in the policymaking process of the investee - this also indicates major influence if the investor can decide the policies like declaring a dividend 3) Technological dependenc- if the investee compay is dependent for technology it in a way is dependent on the invesor has presence of influence.

1. International Accounting Standard (IAS) 28 states that the ability to exercise significant
influence over the operating and financial policies of an investee company is the sole criterion of
requiring the application of the equity method. List three conditions of influence and explain
how each would indicate the presence of influence.
Solution
the following three cosnditions may be deemed to indicate the presence of infuence
1) Representation of investor on the board of directors of the investee- the board of directors act
on behalf of the shareholders and looks after the day to day business of the company so if the
investor has a say in board of directors it indicates presence of influence
2) investor participation in the policymaking process of the investee - this also indicates major
influence if the investor can decide the policies like declaring a dividend
3) Technological dependenc- if the investee compay is dependent for technology it in a way is
dependent on the invesor has presence of influence