IFRS 10 Consolidated Financial Statements
Objective
To introduce a single consolidation model for
all entities based on control, irrespective of the nature of the investee
(i.e., whether an entity is controlled through voting rights of investors or through
other contractual arrangements as is common in special purpose entities).
SIC-12 was, as a result, withdrawn.
Summary
• A subsidiary is an entity controlled by
another entity, the parent.
• Control is based on whether an investor has
1.
power over the investee;
2.
exposure, or rights, to variable returns from its involvement with the
investee; and
3.
the ability to use its power over the investee to affect the amount of the
returns.
• IFRS 10 includes guidance on the assessment
of control, including material on: protective rights; delegated power; de facto
control; and de facto agency arrangements.
• Consolidated financial statements are
financial statements of a group (parent and subsidiaries) presented as
those of a single economic entity.
• When a parent-subsidiary relationship
exists, consolidated financial statements are required (subject to certain
specified exceptions).
• Consolidated financial statements include
all subsidiaries. No exemption for ‘temporary control’, ‘different lines of business’
or ’subsidiary that operates under severe longterm funds transfer
restrictions’. However, if, on acquisition, a subsidiary meets the criteria to
be classified as held for sale under IFRS 5, it is accounted for under that
Standard.
• Intragroup balances, transactions, income
and expenses are eliminated in full.
• All entities in the group use the same
accounting policies and, if practicable, the same reporting date.
• Non-controlling interests (NCI) are
reported in equity in the statement of financial position separately from the
equity of the owners of the parent. Total comprehensive income is allocated
between NCI and the owners of the
parent even if this results in the NCI having
a deficit balance.
• Partial disposal of an investment in a
subsidiary while control is retained is accounted for as an equity transaction
with owners, and no gain or loss is recognised in profit or loss.
• Acquisition of a further ownership interest
in a subsidiary after obtaining control is accounted for as an equity transaction
and no gain, loss or adjustment to goodwill is recognised.
• Partial disposal of an investment in a
subsidiary that results in loss of control triggers remeasurement of the
residual holding to fair value. Any difference between fair value and carrying
amount is a gain or loss on the
disposal, recognised in profit or loss.
Thereafter, IAS 28, IAS 31 or IFRS 9/IAS 39 is applied, as appropriate, to the
residual holding.
Effective date
Annual periods beginning on or after 1
January 2013. Earlier application permitted – but only if IFRSs 11 & 12 and
IASs 27 & 28 (2011) are applied from the same date.