IFRS10 Establishes the principles for SCOPE OF CONTROL

presentation and preparation of

consolidated financial statements when an Control is presumed to exist when the parent acquires
entity controls one or more other entities. more than 50% ownership over the subsidiary. The
acquisition may be done directly or indirectly through
Attributes of control: subsidiary.

A) Power over the investee To illustrate:

B) Exposure or rights to investee’s
variable returns Assume A Company owns 80% interest in B
C) Ability to use this power to affect Company, while B Company owns 40% interest in C
the amount of investor’s returns. Company.

Parent-Subsidiary Relationship
Acquiring majority shares of stocks of
another corporation may result in a
parent-subsidiary relationship where the
Therefore, A Company directly owns 80% interest
parent, who is the acquirer/investor,
of B Company and indirectly owns 24% interest of
obtains control over the subsidiary, who is
C Company.
the acquiree/investee.
De facto control – investor can have the power or control
An entity that is a parent must present
even if it holds 50% or less when there is:
consolidated financial statements that
include all subsidiaries of the parent 1. Power over more than one half of the voting
Exceptions: rights by virtue of an agreement with the other
investors;
 It is a wholly-owned subsidiary or is 2. Power to govern the financial and operating
partially owned subsidiary of another policies of the enterprise under a statute or an
entity and its other owners agree agreement;
 Its debt or equity instruments are not 3. Power to appoint or remove the majority of
traded in the market the members of the members of the board of
 The parent has not filed or is in the directors or equivalent governing body; or
process of filing, its financial 4. Power to cast the majority votes at meetings
statements with SEC. of the board of directors or equivalent
 The ultimate or intermediate parent governing body.
produces consolidated financial
statements that are available for
public use and comply with IFRS.