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INTRODUCTION TO CONSOLIDATION &
GROUP ACCOUNTS :silhouettes:,…
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THE LINK ELEMENT
MFRS 10.17
- Investor controls investee (Investor not only has power over the onvestee & exposure / rights to variable returns from its involvement with the investee, but also has the ability to use its power to affect the investor's returns from its involvement with the investee)
MFRS 10.18
- An investor with decision making rights shall determine whether it is a principal / agent.
- An investor that is an agent in accordance with paragraphs B58-B72 does not control an investee when it exercises decision making rights delegated to it.
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THE RETURNS ELEMENTS
MFRS 10.15
- An investor is exposed/has rights to variable returns from its involvement with the investee when the investor's returns from its involvement have the potential to vary as a result of the investee's performance.
- The investor's returns can be only positive, only negative / both positive and negative
- Returns may include dividends, other distribution from holding equity instruments in the investee, upfront fees, access to cash, service fee, returns not available to NCI, cost savings, etc
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DEFINITION OF PARENTS & SUBSIDIARIES
1. GROUP= Parent + All their subsidiaries
2. Parents= Controlling Subsidiaries
3. Subsidiary= Entity that is CONTROLLED by another entity (Control >50%)
4. Joint Arrangement= Arrangement between 2 or more parties that have JOIN CONTROL.
5. Associate= Entity that has SIGNIFICANT INFLUENCE (20%) & which is neither a subsidiary nor an interest in joint venture.
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DEVELOPMENT OF THE STANDARDS
2001 IAS 27
Consolidated Financial Statements & Accounting for Investment in Subsidiary
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2003 IAS 27 Consolidated Separate Financial Statements
2011 IAS 27 Separate Financial Statements. IFRS 10 Consolidated Financial Statements
2015 IFRS 10 Consolidated Financial Statements (Investment Entities)
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MFRS 10.5 -An investor shall determine whether it is a parent by assessing whether it controls the investee
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MFRS 10.6
-An investor controls an investee when it is exposed or has rights to variable returns from its involvement with the investee.
-Has the ability to affect those returns through its power over the investee
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MFRS 10.7
-An investor controls an investee if and only if the investor has:
a) POWER over the investee.
b) Exposure or rights, to variable returns from its involvement with the investee (returns)
c) Ability to use its power over the investee to affect the amount of the investor's returns (link).
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