Potential Voting Rights – “To be assessed to know if CONTROL exists” - Ind-As

An entity is considered to be under control by one of its Investor when its relevant activities (which are a cause of affecting profits/loss of the business) are being directed by such Investor. Such control could either be through present voting share e.g. Equity voting right or could be in a form of potential voting rights e.g. call options, warrants, convertible instruments which could be converted/ exercised which will result into voting rights in the Investee.

Now,

After the applicability of Ind-As/ IFRS, all such potential voting rights would now to be taken care while assessing the voting rights or percentage holding which can then be substantiated if control is exists.

Let’s first refer the guidance as per the relevant accounting standards which talks about the concept of Potential Voting Rights-

Potential voting rights

Ind-As -110- Consolidated Financial Statements- Appendix B

Para- B47 - When assessing control, an investor considers its potential voting rights as well as potential voting rights held by other parties, to determine whether it has power. Potential voting rights are rights to obtain.......for further please refer http://gyanifrs.com/2017/05/potential-voting-rights-to-be-assessed-to-know-if-control-exists/