What is the subject matter of IFRS 10?

Overview. IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls.

Can you consolidate if you own less than 50 %?

Consolidated financial statements are used when the parent company holds a majority stake by controlling more than 50% of the subsidiary business. Parent companies that hold more than 20% qualify to use consolidated accounting. If a parent company holds less than a 20% stake, it must use equity method accounting.

What are the three key elements of the definition of control in business combination?

The control principle in IFRS 10 sets out the following three elements of control:

  • power over the investee;
  • exposure, or rights, to variable returns from involvement with the investee; and.
  • the ability to use power over the investee to affect the amount of those returns.

When a parent loses control over a subsidiary the parent shall?

35If a parent loses control of a subsidiary, the parent shall account for all amounts recognised in other comprehensive income in relation to that subsidiary on the same basis as would be required if the parent had directly disposed of the related assets or liabilities.

What IFRS 3?

IFRS 3 establishes the following principles in relation to the recognition and measurement of items arising in a business combination: Recognition principle. Identifiable assets acquired, liabilities assumed, and non-controlling interests in the acquiree, are recognised separately from goodwill [IFRS 3.10]

What is the purpose of IFRS 10?

The objective of IFRS 10 as set out in the standard is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

What major criteria must be met before a company is consolidated?

In general, the consolidation of financial statements requires a company to integrate and combine all of its financial accounting functions together in order to create consolidated financial statements that shows results in standard balance sheet, income statement, and cash flow statement reporting.

What happens to equity on consolidation?

When consolidating the equity section of the balance sheet as well as the statement of owners’ equity (or stockholders’ equity, in the case of corporations), the subsidiary’s equity disappears.

What is the difference between IFRS 3 and IFRS 10?

Both standards deal with business combinations and their financial statements. But while IFRS 10 defines a control and prescribes specific consolidation procedures, IFRS 3 is more about the measurement of the items in the consolidated financial statements, such as goodwill, non-controlling interest, etc.

What is control in a business combination under IFRS 3?

In most cases, control of an investee is obtained through holding the majority of voting rights. Therefore, control is normally obtained through ownership of a majority of the shares that confer voting rights (or through obtaining additional voting rights resulting in majority ownership if some were already held).

Under what conditions will a parent be exempted from consolidation?

Subsidiary undertakings may be excluded from consolidation on the following grounds: (1) an individual subsidiary may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view; (2) an individual subsidiary may be excluded from consolidation for reasons of …

How do you Derecognise a subsidiary?

Derecognize all assets and liabilities of the subsidiary at the date when control is lost; Derecognize any non-controlling interest in the lost subsidiary; Recognize fair value of consideration received from the transaction, Recognize any resulting gain or loss in profit or loss attributable to the parent.