Control

Why does it matter in a group?

Control decides what is consolidated. A company with control is a subsidiarySubsidiaryA company that is controlled by another company, its parent.Open the glossary entry and is included line by line. A company with less is an associateAssociateA company over which an investor has significant influence but not control, usually shown by holding 20 percent or more of the votes. It is included in the group accounts by the equity method.Open the glossary entry or a joint ventureJoint ventureAn arrangement in which the parties with joint control have rights to its net assets. A joint venture is included in the group accounts by the equity method.Open the glossary entry and is shown on one line. Control is judged on three tests together: power over the investee, exposure to its variable returns, and the ability to use that power to affect those returns.¹ A majority of the votes usually gives power, but rights written into agreements can give it too, and it is judged again when facts change.

A small example

Zenvara holds 80 percent of the votes in Kestrelwick Pte Ltd and appoints its board. It controls Kestrelwick and consolidates it in full. The owners of the other 20 percent are the non-controlling interestNon-controlling interestThe share of a subsidiary's equity and profit that belongs to owners outside the group.Open the glossary entry.