IFRS 10 Consolidated Financial Statements Archives – FAQ | IFRS

IFRS 10 Objective Scope


1 The objective of this IFRS is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.

Meeting the objective

2 To meet the objective in paragraph 1, this IFRS

  1. requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
  2. defines the principle of control, and establishes control as the basis for consolidation;
  3. sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee;
  4. sets out the accounting requirements for the preparation of consolidated financial statements; and
  5. defines an investment entity and sets out an exception to consolidating
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IFRS 10 Control

5 An investor, regardless of the nature of its involvement with an entity (the investee), shall determine whether it is a parent by assessing whether it controls the investee.

6 An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

7 Thus, an investor controls an investee if and only if the investor has all the following:

  1. power over the investee (see paragraphs 10–14);
  2. exposure, or rights, to variable returns from its involvement with the investee (see paragraphs 15 and 16); and
  3. the ability to use its power over the investee to affect the amount
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IFRS 10 Accounting requirements

19 A parent shall prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.

20 Consolidation of an investee shall begin from the date the investor obtains control of the investee and cease when the investor loses control of the investee.

21 Paragraphs B86–B93 set out guidance for the preparation of consolidated financial statements.

Non-controlling interests

22 A parent shall present non-controlling interests in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

23 Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (ie transactions with owners in their … Read more

IFRS 10 Investment entity

27 A parent shall determine whether it is an investment entity. An investment entity is an entity that:

  1. obtains funds from one or more investors for the purpose of providing those investor(s) with investment management services;
  2. commits to its investor(s) that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
  3. measures and evaluates the performance of substantially all of its investments on a fair value basis.

Paragraphs B85A–B85M provide related application guidance.

28 In assessing whether it meets the definition described in paragraph 27, an entity shall consider whether it has the following typical characteristics of an investment entity:

  1. it has more than one investment (see paragraphs B85O–B85P);
  2. it has more
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IFRS 10 Investment entities: exception to consolidation

31 Except as described in paragraph 32, an investment entity shall not consolidate its subsidiaries or apply IFRS 3 when it obtains control of another entity. Instead, an investment entity shall measure an investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9.

32 Notwithstanding the requirement in paragraph 31, if an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services that relate to the investment entity’s investment activities (see paragraphs B85C–B85E), it shall consolidate that subsidiary in accordance with paragraphs 19–26 of this IFRS and apply the requirements of IFRS 3 to the acquisition of any such subsidiary.

33 A parent … Read more

IFRS 10 Application guidance

Appendix B

Application guidance

This appendix is an integral part of the IFRS. It describes the application of paragraphs 1–33 and has the same authority as the other parts of the IFRS.

B1 The examples in this appendix portray hypothetical situations. Although some aspects of the examples may be present in actual fact patterns, all facts and circumstances of a particular fact pattern would need to be evaluated when applying IFRS 10.Read more