An investor who owns 15% of an entity's voting shares can
A) potentially have influence over the investee if the shares are widely held.
B) always be assumed to have little or no influence over the investee.
C) be assumed to be using the cost model.
D) be assumed to always use the equity method.

Question

Quizplus · Accepted Answer

An investor who owns 15% of an entity's voting shares can potentially have influence over the investee if the shares are widely held. The extent of influence will depend on factors such as the size of the investee and the level of ownership held by other investors. Therefore, it cannot be assumed that they have little or no influence over the investee, and it is not necessary to use the equity method. The choice of accounting method (cost model vs equity method) will depend on the level of influence and control the investor has over the investee.

An Investor Who Owns 15% of an Entity's Voting Shares