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DownloadUpdated: December 2021
Effective Date: Fiscal years beginning on or after January 1, 20121
- The continuing power to determine an entity’s strategic operating, investing and financing policies without the co-operation of others.
- Normally the holder of the right to appoint the majority of the voting members to an entity’s board of directors would have the power to determine an entity’s strategic policies and thus would be presumed to control the entity.
- If two organizations have the same board of directors it is presumed that one of the organizations controls the other.
- The presumption of control is only overcome if there is clear evidence control does not exist.
- Section 1591, Subsidiaries2, in Part II of the Handbook provides further guidance on determining whether an organization controls a profit-oriented enterprise.
- In the case where the right to appoint the majority of the voting members of an NPO’s board of directors is absent, the reporting enterprise would need to consider other aspects of its relationship with the NPO to determine whether other indicators of control are present, such as:
- A significant economic interest in the other organization (see paragraphs 4450.10-.12);
- Provisions in the other organization’s charter / bylaws that cannot be changed without the reporting organization’s consent and which limit the other organization to activities that provide future economic benefits to the reporting organization; or
- The purpose of the other organization is integrated with the purpose of the reporting organization so that the two organizations have common or complementary objectives.
- In some cases a single indicator of control is sufficient for an organization to conclude that control exits, while in other cases more than one indicator may be required.
1 Except as specified in paragraphs 4450.51-.52.
2 See also our publication ASPE At a Glance: Section 1591 – Subsidiaries.
3 See also our publication ASPE At a Glance: Section 1601 – Consolidated Financial Statements.
4 See also our publication ASPE At a Glance: Section 3051 – Investments.
5 See also our publication ASPE At a Glance: Section 3051 – Investments.
6 See also our publication ASPE At a Glance: Section 1601 – Consolidated Financial Statements.
7 See also our publication ASPE At a Glance: Section 3051 – Investments.
8 See also our publication ASPE At a Glance: Section 1601 – Consolidated Financial Statements.
9 See also our publication ASPE At a Glance: Section 3051 – Investments.
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