If a Company Acquires a 40% Ordinary Share Interest in Another

question 192

Multiple Choice

If a company acquires a 40% ordinary share interest in another company,

• A) the equity method is usually applicable.
• B) all influence is classified as controlling.
• C) the cost method is usually applicable.
• D) the ability to exert significant influence over the activities of the investee does not exist.

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Definitions:

Cognitive Dissonance

The mental discomfort experienced by a person who holds two or more contradictory beliefs, ideas, or values at the same time.

Referent Informational Influence

A form of social influence where individuals conform to the behavior of a group they admire or relate to, in order to be accepted or to identify with the group.

Normative Influence

The effect of societal norms and expectations on an individual’s behavior, driving conformity to group standards to gain acceptance or avoid disapproval.

Social Disapproval

Negative reactions or responses from a social group or society towards certain behaviors, actions, or ideas.