INTRODUCTION TO CONSOLIDATION & GROUP ACCOUNTS 👥
✅ Control by Contractual Arrangements
MFRS 10 (B39)
- between an investor & other vote holders can give the investor the right to exercise voting rights.
- might ensure that the investor can direct enough other vote holders on how to vote.
✅ Agency Relationships - "de facto agents"
MFRS 10 (B73)
- an investor shall consider the nature of its relationship with other parties.
- requires judgement, considering not only the nature of the relationship but also how those parties interact with each other & the investor.
MFRS 10 (B75) - Who act as "de facto" agents?
- investor's related parties
- a party received its interest
- a party agreed not to sell, transfer / encumber its interest
- a party that cannot finance its operations
- an investee for which the majority of the members of its governing body / for which its key management personnel
- a party that has a close business relationship with investor
✅ Reassessment of Control
MFRS 10 (B80)
- changes to one / more of the three elements of control listed in para 7.
MFRS 10 (B81) - changes to decision-making rights can mean that relevant activities are no longer directed through voting rights
✅ Potential Voting Rights
✅ Control over Specified Assets
MFRS 10 (B76) - An investor shall consider whether it treats a portion of an investee as a deemed separated entity, and if so, whether it controls the deemed separate entity.
MFRS 10 (B77) - Satisfied Conditions :
- Specified assets of the investee are the only source of payment for specified liabilities of, or specified other interest in.
- Other parties with the specified liability do not have rights, obligations.
- All assets, liabilities and equity of that deemed separate equity (silo) are ring-fenced from overall investee.
MFRS 10 (B90)
- the proportion allocated to the parent & non-controlling interest in preparing consolidated financial statement is determined by taking into account the eventual exercise of those potential voting rights.
- other derivatives that currently give the entity access to the returns.
How to apply the control principle? : MRFS (IN9)
- Investor holds less than a majority of voting right and involving potential voting rights
- when voting rights are not dominant factor
- involving agency relationships
- when the investor has control over specified assets
- MFRS(B35) : Investor holds more than half of the voting rights of an investee has power
- MFRS10(B41) : Investor with less than majority rights has rights that are sufficient to give it power when the investor has the ability to direct the relevant unilaterally activities
-MFRS10(B42) : consideration when assessing whether an investor's right are sufficient.
- the size of the voting right hold and the dispersion of holdings of the other vote holders
- more voting rights, more right to direct relevant activities
- more voting rights hold relative to other vote holders, more right to direct relevant activities
- more parties act together outvote, more right to direct relevant activities
- potential voting rights held by investor, other vote holders or parties
- right arising from other contractual arrangements
4.if there any additional facts or circumstances, current ability to direct relevant activities at the time need to be made
✅Application of the Control Model
✅ Control of Voting Rights
-MFRS10(B43) : the direction of relevant activities is determines by majority vote and an investor hold more voting rights than other vote holder, the other shareholdings are widely dispersed.
de facto control :