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A Standard Setting Perspective on Current Issues Facing the Accounting Profession - page 14 / 29

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Defining the reporting entity:  consolidation

Quantitative approaches to defining control

Problems arise when control exists or can exist without a majority equity voting interest

Effective control:  holder of a substantial minority interest and no other holder (or organized group) has a significant interest.  

Example:  Pyramid arrangements and cross-holdings

Example:  Coca Cola holds substantial minority interests in some of its bottling affiliates.  Does Coca Cola control those affiliates?

Question:  Should patterns of voting behavior affect whether one entity controls another entity?

Question:  Perhaps the holder of the substantial minority interest is currently in control, and the issue is whether he can perpetuate control.

Voting (equity) interest does not convey control, because      of the design of the entity

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