Prior to 2008, CBS Corp. owned approximately 18% of Westwood One, Inc., which managed the CBS Radio Network. CBS, in turn, managed Westwood under a management agreement. Further, one employee of CBS was a member of Westwood's board of directors. CBS did not control the board of directors, however. In this situation, how should CBS account for its investment in Westwood One?

Question

Business

Logan Curry

12 April, 20:15

Prior to 2008, CBS Corp. owned approximately 18% of Westwood One, Inc., which managed the CBS Radio Network. CBS, in turn, managed Westwood under a management agreement. Further, one employee of CBS was a member of Westwood's board of directors. CBS did not control the board of directors, however. In this situation, how should CBS account for its investment in Westwood One?

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Nataly Delacruz · Answer 1

Answer and explanation:

The influence a company may have over another when one of them has a number of shares that belongs to the other is determined by the percentage of ownership that the number of shares represent. If its lower than 20%, it is said the company has no influence over the other. From 20% to 50% one company has significant influence over the other. Finally, with more than 50% of the outstanding shares in possession, one company has control over the other.

In that case, CBS Corp. has no influence over Westwood One, Inc. since it owns only 18% of the outstanding shares.