IFRS 10 Consolidated Financial Statements
Scope
Applies to all PARENT entities EXCEPT
Wholly-owned sub
Debt/equity instrument not traded
It does not file FS with security commission
Ultimate/ intermediary parent produced FS which are publicly available
Parent of investment entity as measures all subs at FV (pl)
Control ( NOT ALWAYS DOWN TO WHO OWN MAJORITY)
Only a parent if controls investee ONLY ONE ENTITY CAN CONTROL ANOTHER
Exposed/ has rights to VARIABLE RETURNS from involvement and can impact the returns via POWER and reassess when facts and circumstances change.
Control only if ALL
Power over investee
Link between power and return
Ability to use power over investee to affect amount of investors returns
Two or more investors can collectively control when they must act together to direct relevant activities because without cooperation no control (control is joint)
Existing rights= give CURRENT ability to direct RELEVANT ACTIVITIES (activities which significantly affect the investee's return)
Arises from rights must be substantive rights
Two or more=have existing rights= unilateral ability to direct DIFFERENT relevant activities, then one which has current ability to direct MOST significant activity which relates to returns has POWER
Protective rights= NO CONTROL
Substantive rights= CONTROL
Current ability to direct relevant activities has rights even if not exercised (helps as evidence but not conclusive)
Must have exposure to the ability of variable returns but must also be able to use power AFFECT the returns via its involvement
Not only power and exposure/right to variable returns but has ability to use its power to affect their returns from their involvement
Investor with decision making rights ASSESS IF AGENT OR PRINCIPAL
Accounting Requirements
Parent must consolidate using uniform accounting policies for like transactions
Consolidation begins from date of control and ceases when control is lost
Non Controlling interest
Present in equity separately from equity owners of the parent
Changes which do not result in a loss in control are EQUITY adjustments between NCI and PEH
Loss of control DE-RECOGNIZED everything that you are giving up and FV any remaining part
Investment Entity
an entity is one that
Obtains funds from one/more than investors for the purpose of providing investment management services
Purpose is to invest funds solely for returns from capital appreciation and/or investment income
Measures and evaluates performance of majority of subs at FV (PL)
Typical characteristics (absence of any doesn't automatically disqualify but needs additional disclosure)
More than one investment
More than one investor
Investors are not related parties
Ownership interest in the form of equity/similar interests
Something changes then reassess and if cease/becomes to be an investment entity account for change in its status prospectively from the date at which change in status occurred
Exception to consolidation
NOT consolidate or apply IFRS 3 when obtains control INSTEAD FV (PL) as per IFRS 9
WHEN DO WE CONSOLIDATE when an investment entity = sub which is not an investment entity and whose main purpose is to provide services that relate to the investment entities activities then CONSOLIDATE and apply IFRS 3 to the acquisition
Factors to help assess if control or not
Purpose and design to help see if equity instruments are designed to give control but not always the dominant design or purpose for them thus consider other factors if unclear
Identify the relevant activities
How decisions about relevant activities are made
Who has current ability to direct those activities
Who receives returns from those activities
Exposure/rights to variable returns from involvement in subsidiary