Assessing when one entity controls another (in other words, when a parent-subsidiary relationship exists) is essential to the preparation of financial statements in accordance with International Financial Reporting Standards (IFRS). The control assessment determines which entities are consolidated in a parent’s financial statements and therefore affects a group’s reported results, cash flows and financial position. Under IFRS, this control assessment is accounted for in accordance with IFRS 10 ‘Consolidated financial statements’.
IFRS 10 was issued in May 2011, and was part of a package of changes addressing different levels of involvement with other entities. IFRS 10 redefines ‘control’ and provides extensive guidance on applying the definition.
It is unusual for IFRS 10 to affect the scope of consolidation in simple situations involving control through ownership of a majority of the voting power in an investee. However, more complex and borderline control assessments need to be reviewed carefully.
We have gained extensive insights into the application of IFRS 10 and we have developed general guidance that supports the commitment to high quality, consistent application of IFRS. We are pleased to share these insights by publishing ‘Under control? A practical guide to applying IFRS 10 Consolidated Financial Statements [ 871 kb ]’.
The guide has been written to assist management in applying IFRS 10. More specifically it aims to assist in:
If you would like to discuss any of the topics raised in this guide please contact me or your local Grant Thornton member firm.
