fatvegan

15. In assessing whether potential voting rights contribute to control, the entity examines all facts and circumstances (including the terms of exercise of the potential voting rights and any other contractual arrangements whether considered individually or in combination) that affect potential voting rights, except the intention of management and the financial ability to exercise or convert. AASB 127 - Consolidated and Separate Financial Statements

This is all well and good but the exemption of the financial ability to exercise seems a bit dangerous to me. What is to prevent rogue management from issuing large numbers of stock options with strike prices far above the likely price of the stock. The options will not devalue the stock since they will never be exercised, but they will cast doubt over anyone's claim to control of the company since they can never have the majority of all authorised shares - or even 100% of feasibly useful shares. Perhaps it's not different enough from having a distinction between voting shares and ordinary shares - which is legal - for the IASB people to care. But given the care they seem to have gone to, to provide a sturdy definition of control it seems like an odd exception to allow.