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When Does an Investor Need to Reassess Control Over an Investee According to Accounting Standards?
Which of the following circumstances would not trigger the need for an investor to reassess whether it controls an investee? A. An investor increases its holdings in the investee B. A change in market condition occurs, which does not cause a change to one or more of the three elements of control C. An investee’s governance changes such that its current ability to direct relevant activities is no longer directed through voting rights, but instead, is directed by contract D. A potential voting right in the investee is granted

According to the principles outlined in the enterprise accounting standards, an investor is required to reassess its control over an investee when there are changes in the relevant facts and circumstances that affect the three elements of control: power, returns, and the ability to use power to affect those returns.

A. An increase in an investor's holdings in the investee could potentially impact the investor's power over the investee, triggering a reassessment.

B. If a change in market conditions does not alter the investor's power, returns, or ability to influence returns, then it may not necessitate a reassessment of control.

C. A change in the investee's governance structure, such that decision-making shifts from voting rights to contractual arrangements, directly affects the element of power and would require a reassessment.

D. The grant of a potential voting right could potentially increase the investor's power, leading to a need for reassessment.

Therefore, the circumstance that would not trigger the need for an investor to reassess whether it controls an investee is B. A change in market condition occurs, which does not cause a change to one or more of the three elements of control. This situation, by itself, does not directly impact the control elements as defined in the accounting standards.