Question to answer:

Common stock also often times comes with pre-emptive rights, which means the share holder has a "right to refusal" or "first dibs" on buying any new stock the company tries to issue. Please elaborate on this statement further.

Original statement where question came from:

Intercompany investments and related reporting issues have greatly attracted the most attention from standard setters. Presently there have been about 10 international financial reporting standards that address this issue. The standards include IAS 32, IAS 39, and IFRS 9, IFRS 13, IAS 28 and some other standards. Corporations invest in other corporations equity rather stock for two reasons such as to earn investment income in the form of dividends and stock price appreciation and also to exert influence or control over the operating and financial policies of the investee firm. Small equity investments are made to earn income over short-term period of time while larger ones often signal an attempt to influence the operations of target companies. Under International Reporting Standards, the way to account for equity investments is greatly determined by the amount of influence that investors have over the investee company. To determine the level of influence, IFRS rules use a percentage of ownership of voting shares which have been categorized into three levels below 20%, 20%-50% and over 50%.

Investments in voting shares below 20% signifies no control or influence in the investee and such methods are reported using fair value method as given in the FASB Codification number 320 which illustrates and interprets fair value method of accounting for equities in non-controlled corporations. ASC 320 and 325 stipulates rules and signifies lack of influence and control. Such investments are treated as short-term and thus meant to generate income for the investor. ASC 325 addresses cost method of accounting for equities in which the investor does not have control and influence. Equity ownership of above 50% is generally reported under equity method as rule by ASC number 323. Such investments depict significant control and influence in the operating and financing decisions of the investee. Equity ownership of between 20%-50% on the other hand depicts significance influence but no control in the investees operations. Such investments are accounted for either under equity method. These investments may be classified as available for sale securities, trading securities and held to maturity. This level falls for available for sale securities and trading securities. ASC 325 and 320 governs their reporting. Investment under 20% are regarded as passive investments and thus reported at fair value in tandem with ASC 320. Active investments are those over 50% of ownership of voting shares and are regarded as long term investments intended to influence and control the operating activities of the investee.