IFM22345 | Real Estate Investment Trust : Group conditions and rules: Financial Statements: property rental business and residual: significant influence : SI2006/2865/Regulation (3)

One of the key factors determining how entities in which the group has an interest are treated in the financial statements of the property rental business and the residual business is whether or not the group has significant influence over it. This is defined in SI 2006/2865 Reg 3.

Members of the group have significant influence in an entity if:

· at least one member of the group has a beneficial interest in the entity and

· members of the group have an interest in it of more than 20%.

The beneficial interest members of the group have in an entity is measured by reference to their entitlement to profits available for distribution to equity holders. Where the entity is a company, equity holders are shareholders and entitlement to profits will be by reference to their entitlement to dividends.

For entities that are not companies, the entity is treated as a UK company and the rights of any person in the entity as shares in that company. For example, if the entity is an authorised unit trust, the units are treated as shares in a company and entitlement to profits is entitlement to distributions.

Profits available for distribution to equity holders do not include any profits available to an equity holder in any other capacity other than that as equity holder. For example, an equity holder may have shares in a company and have made a profit-related loan to the company. The measure of profits for beneficial interest purposes will include the dividends on shares but not their entitlement to loan interest.

Note that unlike the IAS definition, there is no provision to allow an influence to be significant where the interest is 20% or less.