In financial reporting, what is meant by ‘control’ in relation to significant influence?

In financial reporting, 'control' in relation to significant influence refers specifically to the capacity to exercise power over financial and operating decisions of an investee. This concept is integral when assessing the nature of relationships between companies, particularly when determining whether one entity can govern the financial and operational policies of another.

Control means that the controlling entity can direct the relevant activities of the investee, which can significantly affect the outcomes that impact economic returns. This encompasses not only the power to make decisions but also the authority to influence the strategic direction and actions of the investee, thereby directly impacting its financial performance and policies.

The other options suggest more limited meanings of control. Exclusively owning the majority of shares implies a straightforward ownership relationship, which does not necessarily translate to controlling decision-making unless there are mechanisms in place that grant the shareholder authority. Determining the business direction through majority vote is a step toward control, but it does not fully capture the comprehensive influence required to affect the investee's financial and operational decisions. Lastly, making unilateral decisions without input from others also does not reflect the relational aspect of significant influence, which often involves collaboration and shared objectives rather than solo decision-making.

Thus, option C encapsulates the essence of control as it pertains to significant influence