Significant influence

Significant influence is the ability to affect an investee's operating and financial policies without controlling it. The conclusion determines whether an eligible ownership interest enters the equity method, so it must be made before the carrying-amount schedule begins.

Weigh all relevant evidence

Ownership percentage can create a presumption, but it does not decide the question by itself. ASC 323-10-15-6 lists indicators that include board representation, participation in policy making, material transactions, interchange of managerial personnel, technological dependence, and ownership relative to other shareholders. Contractual limits and other contrary facts also belong in the analysis.

For example, a 30-percent interest plus a board seat and active policy participation can support significant influence. The same percentage with strong contrary evidence may require a different conclusion. A smaller interest can also carry persuasive qualitative evidence. Do not turn 20 percent or any other percentage into an automatic rule.

Date the conclusion

Record voting and potential voting rights, governance evidence, transactions, dependencies, restrictions, opposing ownership, scope exclusions, and the effective date. Separate influence from control, which may lead to consolidation. Reassess when ownership or governance changes. Proposal-stage FASB projects are monitoring items until issued guidance becomes effective; they do not change the current conclusion merely because the Board discussed them.