Facebook Twitter

GAAP For Non-Profits › Significantly Influenced Entities

Significantly Influenced Entities

Significant influence is the ability to influence the strategic operating, investing and financing policies of an entity. Significant influence can be present for a variety of reasons: representation on the Board; the sharing of common management; involvement in policy making; or a strong economic interest in another organization may point to the existence of significant interest. There is a presumption that the reporting organization has significant influence over a for-profit organization if it holds at least 20% of the voting shares. (An organization does not have to consider the accounting implications of significant influence if the significant influence is only of a temporary nature.)

Where there is significant influence over a non-profit organization, the following should be disclosed:

Where significant influence exists over a profit orientated organization, the reporting organization should account for the investment using the equity method as described in section 3051 of the CICA Handbook. (4450.43)