IFRS 10 and 12 CPD September 2013

IFRS 10 Consolidated Financial
Statements (including
investment entities) and related
disclosures in IFRS 12
IFRS Foundation
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IFRS Foundation
Agenda
Objective of consolidated financial statements and

the link to the conceptual framework
Reasons for issuing IFRS 10
Scope, concepts, requirements and examples
Estimates and other judgements
Disclosure (IFRS 12)
Investment entities
Effective date and transition
IFRS Foundation
Objective of consolidated
financial statements and
the link to the conceptual
framework
IFRS Foundation
Introduction
Focus: preparation and presentation of consolidated

statements in accordance with IFRS 10 Consolidated
Financial Statements
Consolidated financial statements present financial
information about the group (ie a parent and its
subsidiaries) as a single economic entity
IFRS 10 Consolidated Financial Statements requires an
entity that is a parent to present consolidated financial
statements (except in very limited circumstances)
Main judgement : identification of subsidiaries
IFRS Foundation
Why consolidation?
Question: Why are entities required to

present consolidated financial statements?
Provide information about economic entity
investors need information about all assets and
liabilities of combined entity
Definition of asset based on control:

with control, entity can dictate use or settlement
control through an entity is indirect control
Do not want legal form to dictate financial

reporting
IFRS Foundation
Link to the Conceptual Framework
Information must be useful to users in making

decisions about providing resources to the entity
Assessment of entitys prospects for future net cash
inflows
Resources of the entity + claims against the entity +
how efficiently and effectively entitys resources are
used
Core principle of IFRS 10: if control, information
must be consolidated (resources, claims, etc as a
single economic entity)
IFRS Foundation

Relevant
8 8
Information about the economic entity (ie one

or more investees under a common
controlling entity) is a useful input to users in
predicting future outcomes (predictive value).
Fundamental
qualitative
characteristics
Faithfully
represents
economic
phenomena
Information about the economic entity (ie a

group) includes information about ALL
recognised resources and ALL recognised
claims and the effectiveness and efficiency in
using such resources (complete).
IFRS Foundation
PRIMARY USERS OF FINANCIAL INFORMATION
Consolidated
financial
information
(A+B+C)
Other
creditors
Lenders
Investors
ECONOMIC ENTITY
ENTITY A
(INVESTOR)
CONTROLS
ENTITY B
CONTROLS
ENTITY C
IFRS Foundation
Investment in D is
an asset in As
statement of
financial position
DOES NOT CONTROL
ENTITY D
Reasons for issuing

IFRS 10
IFRS Foundation
Reasons for issuing IFRS 10
11
The IASBs objective in issuing IFRS 10

was to improve the usefulness of
consolidated financial statements by
developing a single basis for consolidation
and robust guidance for applying that basis
to situations in which it has proved difficult
to assess control in practice.
The basis for consolidation is control and it
is applied irrespective of the nature of the
investee.
IFRS Foundation
Scope, concepts,
requirements and
examples
IFRS Foundation
Scope of IFRS 10
13
An entity that is a parent shall present consolidated

financial statements (IFRS 10.4).
A parent is an entity that controls one or more entities
A subsidiary is an entity that is controlled by another
entity (ie the parent)
A group is a parent and its subsidiaries
Consolidated financial statements are the financial

statements of a group in which the assets, liabilities,
equity, income, expenses and cash flows of the parent
and its subsidiaries are presented as those of a single
economic entity.
IFRS Foundation
Interaction:
IFRSs 7, 9, 10, 11 & 12 and IAS 28
14
Control alone?
yes
no
Consolidation in accordance
with IFRS 10
Joint control?
yes
Disclosures in accordance with

IFRS 12
no
Define type of joint arrangement

in accordance with IFRS 11
Joint Operation
Joint Venture
Significant
influence?
yes
no
Account for assets, liabilities, revenues

and expenses
Account for an investment in

accordance with IAS 28
IFRS 9
(or IAS 39)

IFRS 12

IFRS 12
Disclosures in
accordance with
IFRSs 7 and 13
IFRS Foundation
Scope of IFRS 10Exceptions
15
A parent need not present consolidated financial

statements if:
it is itself a wholly-owned subsidiary;
its securities are not publicly traded or in the process of
becoming publicly traded; and
its parent publishes IFRS-compliant financial
statements that are available to the public.
This is also the case for a partly-owned subsidiary if its
other owners have been informed about, and do not
object to, it not presenting consolidated financial
statements.
IFRS Foundation
Scope of IFRS 10Exceptions continued
16
IFRS 10 does not apply to post-employment benefit

plans or other long-term employee benefit plans to
which IAS 19 Employee Benefits applies.
IFRS 10 provides an exception from the
requirements of consolidation for an investment
entity which is instead required to measure its
subsidiaries at fair value through profit or loss
(annual periods beginning on or after 1 January
2014).
IFRS Foundation
The control modelan overview
17
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.
Exposure
to
variable
returns
Power
Link
powerreturns
control
IFRS Foundation
Assessing control of an investee

POWER
Rights
Relevant
activities
18
EXPOSURE
LINK
Exposure
(or rights) to
variable
returns of
the investee
Ability to
use power
over the
investee to
affect its
own returns
IFRS Foundation
Assessing power over an investee

POWER
Rights
Relevant
activities
19
Power = existing rights that give it the

current ability to direct the relevant
activities
Power arises from rights (eg voting
rights, rights to appoint key personnel,
among others)
Relevant activities: significantly affect
the investees returns
An investor need not have absolute power to control an investee

IFRS Foundation
Powerthe ability approach
20
Power over an investee = existing rights that give it the

current ability to direct the relevant activities, ie the
activities that significantly affect the investees returns.
Current ability to direct the relevant activities = investor
is able to make decisions at the time that those
decisions need to be taken.
Can have current ability even if it does not actively direct
An investor is not assumed to have current ability to
direct simply because is actively directing activities
Having the current ability is not limited to being able to

act today.
IFRS Foundation
Powerrights
21
Only substantive rights must be considered in

assessing power.
For a right to be substantive, the holder must have the
practical ability to exercise that right.
To be substantive, rights also need to be exercisable
when decisions about the direction of the relevant
activities need to be made.
IFRS Foundation
Powerrights
22
Voting rights
Potential voting rights
Contractual rights
Removal or kick out rights
An investor that holds only protective rights does not
have power
IFRS Foundation
Example 1A:* power

do rights give power?
23
Investor A holds 45% of the voting rights of an

investee.
Eleven other investors each hold 5% of the voting
rights.
No contractual agreement among shareholders to
consult any of the others or make collective
decisions.
Refer to Example 7 in paragraph B45 of IFRS 10

Consolidated Financial Statements
*
IFRS Foundation
Example 1B:* power

24
Investor A holds 45% of the voting rights of an

investee.
Two other investors each hold 26% of the voting
rights.
Remaining voting rights are held by three other
shareholders (each with 1%).
No other arrangements that affect decision-making.

*
IFRS Foundation
Example 1C:* power

25
An investor acquires 48% of the voting rights of an

investee.
Remaining voting rights held by thousands of
shareholders, with less than 1% each.
None of the shareholders has any arrangements to
consult any of the others or make collective
decisions.

*
IFRS Foundation
Example 1D:* power

26
Investor A holds 35% of the voting rights of an investee.

Three other investors each hold 5% of the voting right.
Remaining voting rights are held by numerous other
shareholders (each holding 1% or less).
Decisions about relevant activities require approval of a
majority of votes.
Recent relevant meetings: 75% of voting rights have
been cast.

*
IFRS Foundation
Example 1E:* power

27
Investor A holds 48% of the voting rights of an investee. The

remaining voting rights are held by numerous other shareholders,
none individually holding more than 1% of the voting rights.
No arrangements to consult others or make collective decisions.
Decisions about the relevant activities require the approval of a
majority of votes cast at relevant shareholders meetings. 70% of
the voting rights of the investee have been cast at recent relevant
shareholder meetingsexcept for one meeting when 78% of the
voting rights were cast. Decisions taken at that meeting included
changing the financing arrangements (ie could affect future
dividend payments to shareholders).
There are no other contractual arrangements that would affect the
assessment of power.
Refer to Example 1 in the section Control without a
majority of voting rights of the Effect Analysis for
IFRS 10 and IFRS 12
*
IFRS Foundation
Example 2:* power

28

Twelve other investors each hold 5% of the voting
rights.
Shareholder agreement: investor A has the right to
appoint, remove and set the remuneration of
management responsible for directing the relevant
activities. Two-thirds majority vote of the shareholders is
required to change the agreement.

*
IFRS Foundation
Example 3A:* rights

29

Investor B has 30% of the voting rights of the investee
as well as an option to acquire half of Investor As voting
rights.
Option exercise = any time in next two years, fixed price
(deeply out of the money and is expected to remain so)
Investor A: exercises its votes and actively directs
relevant activities of the investee.

*
IFRS Foundation
Example 3B:* power

30
Investor A and two other investors each hold a third of

the voting rights of an investee.
Investor A: also holds debt instruments that are
convertible into ordinary shares, fixed price, out of the
money but not deeply out of the money.
If converted, Investor A would hold 60% of the voting
rights.
The investees business activity is closely related to
investor A (ie there are synergies).

*
IFRS Foundation
Example 3C:* power

are rights substantive?
31
Investor A holds 40% of the voting rights of Investee B as

well as an option to acquire another 20% of the voting
rights from Investor C, who holds 30% of the voting rights.
The option is exercisable during 51 weeks in each
calendar year; however, it is not exercisable during the
last week of every year. The option is exercisable for a
nominal amount.
Decisions about the relevant activities require the approval
of a majority of the votes cast at relevant shareholders
meetings, which are generally held during the first or
second quarter of the year.
Refer to Example in the section Potential voting
rights of the Effect Analysis for IFRS 10 and IFRS
*
IFRS Foundation
Example 3D3G:* power

fact pattern
32
The next scheduled shareholders meeting is in eight

months.
Shareholders with at least 5% of the voting rights can call a
special meeting to change the existing policies (notice
requirement prevents meeting from being held for at least 30
days).
Policies over the relevant activities: changed only at special
or scheduled shareholders meetings.

*
IFRS Foundation
Examples 3D3G:* power

33
3D: An investor holds a majority of the voting rights.

3E: An investor is party to a forward contract to acquire the
majority of shares (forward contracts settlement date in 25
days).
3F: An investor holds a substantive option to acquire the
majority of shares (exercisable in 25 days, deeply in the
money).
3G: An investor is party to a forward contract to acquire the
majority of shares (forward contracts settlement date in six
months).

*
IFRS Foundation
Powerrelevant activities
34
Relevant activities significantly affect the investee's

returns
For many investees, a range of operating and financing
activities significantly affect their returns. Examples:
selling and purchasing of goods or services
making capital expenditures or obtaining finance
A higher degree of judgment is particularly required

when assessing control of investees that are not
directed through voting or similar rights and for which
there may be multiple parties with decision-making
rights over different activities.
IFRS Foundation
Example 4:* power

assessing the relevant activities
35
Two investors (A and B) form an investee to develop and

market a medical product.
Investor A: in charge of developing and obtaining regulatory
approval of the medical product.
Once the regulator has approved the product, Investor B will
manufacture and market it.
Investor B has the unilateral ability to make all decisions
about the manufacture and marketing of the project.

*
IFRS Foundation
Example 5:* power

ability to direct relevant activities?
36
Investor A, whose business is the production and sale of

cheese, establishes and initially owns 100% of an operation
(Investee B), which also produces and sells cheese.
Investor A then decides to make Investee B a publicly traded
entity, retaining 30% of voting rights (the other 70% are widely
distributed among thousands of investors , none individually
holding more than 1%).
Investor A also signed a contract with Investee B to manage
and operate all of the activities of Investee B. Investee B has
no employees of its own.
A supermajority vote of 75% is required to cancel the
management and operations contract.
Refer to Example 2 in the section Control without a
majority of voting rights of the Effect Analysis for
IFRS 10 and IFRS 12
*
IFRS Foundation
Example 6:* power

assessing the relevant activities
37
Investees only business: purchase receivables and

service them on a day-to-day basis for its investors.
Upon default of a receivable the investee automatically
puts the receivable to Investor A (put agreement
between the investor and the investee).
Managing the receivables upon default is relevant
because it is the only activity that can significantly affect
the investees returns.

*
IFRS Foundation
Example 7:* power

assessing relevant activities
38
Investor A transfers receivables to Investee B (created solely

for purchasing and servicing those receivables).
Investee B fully funds the acquisition of the receivables by
issuing two different tranches of debt: a senior tranche (90%
of the debt) to the market and a junior tranche (10% of the
debt) to Investor A.
There are few, if any, activities to perform once Investee B is
set up unless the counterparties to the receivables default on
payment. Investor A retains the customer relationships and
manages receivables in the event of default. A third-party
service provider collects the cash flows from the receivables
and passes them to the investors.
Refer to Example 1 in the section Moving away
from bright lines of the Effect Analysis for IFRS 10 /
IFRS 12
*
IFRS Foundation
Example 8:* relevant activities

ability to direct relevant activities?
39
Corporation A (credit card company)arrangement with Investee B

(transfers short-term credit card receivables to B) in a revolving
structure.
Investee B issues securities to market investors, backed by the
receivables in two different tranches: the senior tranche (market
investors) + the junior tranche (Corporation A); Senior tranche =
priority in default; junior tranche = absorbs a majority of risks/rewards
of B.
Corp. A customer relationships with the counterparties to the credit
card receivables + responsibility for managing recoverability of the
receivables in default (renegotiating the terms of current outstanding
receivables or future transactions with those customers).
A third party service provider is employed to collect the receivables
and pass the cash flows on to Investee B.
IFRS 12
*
IFRS Foundation

POWER
Rights
Relevant
activities
40
EXPOSURE
LINK
Exposure
(or rights) to
variable
returns of
the investee
Ability to
use power
over the
investee to
affect its
own returns
IFRS Foundation
Assessing exposure (or rights) to

variable returns
EXPOSURE
Exposure
(or rights) to
variable
returns of
the investee
41
Definition of control: concept of returns

is used in two ways
power ability to direct relevant activities
(ie directing inconsequential activities is
not relevant to assessment of power)
rights, or exposure, to variable returns
Broad definition of returns:

dividends; remuneration from services, fees
and exposure to losses; residual interests on
liquidation; tax benefits; access to future
liquidity; returns not available to other
investors (eg synergies)
IFRS Foundation
Exposure or rights to variable returns
42
An investor is exposed, or has rights, to variable returns

from its involvement with the investee when the
investors returns from its involvement have the
potential to vary as a result of the investees
performance.
The investors returns can be only positive, only
negative or both positive and negative.
Although only one investor can control an investee,
more than one party can share in the returns of an
investee. For example, holders of non-controlling
interests can share in the profits or distributions of an
investee.
IFRS Foundation
Example 9:* exposure

exposed to variable returns?
43
Fund Manager A manages a mutual fund, Fund B, which is created to

maximise profit for its investors. Fund Manager A determines the
investment policy and strategy for the mutual fund.
Corporation C owns 55% of the shares (the rest of the shares are
distributed among the other investors, with none of them individually
holding more than 1%).
None of the investors can unilaterally change the investment policy
and strategy of Fund B, and nor can the investors remove Fund
Manager A without cause. The investors can redeem their interests at
any time within particular limits established in the funds constitution.
Fund Manager A receives a market-based management fee of 2% of
the net asset value in the fund, which is commensurate with the
services that Fund Manager A provides to Fund B.
IFRS 12
*
IFRS Foundation

POWER
Rights
Relevant
activities
44
EXPOSURE
LINK
Exposure
(or rights) to
variable
returns of
the investee
Ability to
use power
over the
investee to
affect its
own returns
IFRS Foundation
Assessing the link between power and

returns
LINK
Ability to
use power
over the
investee to
affect its
own returns
45
Power + rights = necessary conditions

for control (but still not enough)
To control an investee, an investor must
also have the ability to use its power to
affect investors returns from its
involvement with the investee
Control = power that can be used to
benefit the investor
Returns and power: need not be perfectly
correlated
Only one party can control an investee
IFRS Foundation
Link between power and returns
46
A case of power without control is the agency

relationship.
An agent is a party contracted by a principal to perform
some service on behalf of the principal that involves
delegating some authority to the agent.
Agent
acts in the best interests of the principal (fiduciary
responsibility)
principal and agent seek to maximise their own benefits
additional measures to ensure the agent does not act
against the interests of the principal
Delegated power does not mean control.

IFRS Foundation
Link between power and returns

Consider all of the following factors in assessing
whether an investor is acting as a principal or as an
agent:
rights held by other parties (ie kick-out rights)

scope of the decision-making authority
remuneration of the decision-maker
other interests that the decision maker holds in the
investee
IFRS Foundation
47
Example 10:* link

does the decision maker have control?
48
A fund manager establishes, markets and manages a

fund according to narrowly defined parameters.
Fund manager:
has discretion about the assets in which to invest
holds a 10% investment in the fund
receives a market-based fee for its services equal to 1%
of the net asset value of the fund (fees are
commensurate with the services provided)
does not have any obligation to fund losses beyond its
10% investment
investors do not hold any substantive rights

*
IFRS Foundation
Example 11:* link

does the manager have control?
49
Investee: portfolio of fixed rate asset-backed securities,

funded by fixed rate debt instruments + equity instruments.
Equity instruments represent 10% of the value of assets
purchased.
Asset manager is paid fixed and performance-related fees
that are commensurate with the services provided.
Asset manager holds 35% of the equity in the investee
(remaining equity and all the debt instruments are held by a
large number of widely dispersed unrelated third-party
investors) and manages the active asset portfolio by making
investment decisions within parameters.
Asset manager can be removed, without cause, by a simple
majority decision of the other investors.
*
IFRS Foundation
Example 12:* link

does the investor have control?
50
An investment vehicle is created to purchase a portfolio of

financial assets, funded by debt and equity instruments issued to
a number of investors.
The equity tranche is designed to absorb the first losses incurred
by the portfolio and to receive residual returns of the investment
vehicle.
Investor A holds 35% of the equity tranche and is also the asset
manager, managing the vehicles asset portfolio within portfolio
guidelines. This includes decisions about the selection, acquisition
and disposal of the assets within those portfolio guidelines and the
management upon default of any asset in the portfolio.
Investor A also receives market-based fixed and performancerelated fees for its asset management services.
IFRS 12
*
IFRS Foundation
Example 13:* link

does the manager have control?
51
Fund Manager A has a 45% shareholding in Fund B,

which it also manages within defined parameters.
The constitution of the fund defines the funds purpose
and sets out the investment parameters within which
the fund manager can invest. The constitution also
requires Fund Manager A to act in the best interests of
the shareholders. Within the defined parameters,
however, the investment manager (Fund Manager A)
has discretion about the assets in which Fund B will
invest.
Refer to Example in the section Agency
relationships of the effect analysis for IFRS 10 /
IFRS 12
*
IFRS Foundation
Examples 14 AC:* link

fact pattern
52
A fund manager establishes, markets and manages a

fund and must make decisions in the best interests of all
investors (can be removed by simple majority but only
for breach of contract).
Fund manager has wide decision-making discretion.
The fund manager receives a market-based fee for its
services (fixed and performance-related). The fees are
commensurate with the services provided.
Fund manager has extensive decision-making authority
to direct the relevant activities of the fund.
Refer to Example 14 (A, B and C) in paragraph B72

of IFRS 10 Consolidated Financial Statements
*
IFRS Foundation
Examples 14 AC:* link

does the fund manager have control?
53
14A: fund manager also has 2% in the fund. No

obligation to fund losses beyond investment.
14B: fund manager also has a more substantial
investment in the fund. No obligation to fund losses
beyond investment.
14C:
Fund manager has 20% investment.
Fund manager can be removed by board of
directors, who are independent of the fund
manager and appointed by the other investors.
*
IFRS Foundation
Examples 14A, 14B and 14C:*

main judgements
Rights to remove the manager
Aggregate returnsmagnitude and variability

*
IFRS Foundation
54
Example 15:* link

does the sponsor have control?
Manages operation (market fee)
Provides credit enhancement and
liquidity facilities
Entitled to any residual return

Absorbs losses of up to 5% of
assets
Sell asset porfolio

Services assets sold
(market fee)
Provide first loss
protection
55
Provide funding
Receive interest
from debt
instruments
IFRS Foundation
Estimates and other

judgements
IFRS Foundation
Judgements and estimates

in applying IFRS 10: summary
57
Determining whether control exists requires an

assessment of all relevant facts and circumstances,
including:
an evaluation of the purpose and design of the investee;

the activities of the investee;
how decisions about those activities are made; and
rights held by the party involved with the investee.
Particularly challenging for some structured entities:

relevant activities in those entities are not usually
directed by voting or similar rights
benefits or returns expected from such investments can
be more difficult to assess
IFRS Foundation
Disclosures
IFRS Foundation
IFRS 12 Disclosure of Interests in Other

Entities
59
Applies to entities that have an interest in a

subsidiary, a joint arrangement, an associate or an
unconsolidated structured entity.
Requires an entity to disclose information that
enables users of financial statements to evaluate:
the nature of, and risks associated with, its interests in
other entities; and
the effects of those interests on its financial position,
financial performance and cash flows.
IFRS Foundation
Main disclosure requirements
60
Significant judgements and assumptions made (and

changes to those judgements and assumptions) in
determining that it has control of another entity
Information about interest in subsidiaries
composition of the group
interest that non-controlling interests (NCI) have in
activities and cash flows
signficant restrictions
risks
consequences of changes in ownership interest
consequences of losing control
IFRS Foundation
Subsidiaries that have material

non-controlling interests
61
An entity shall disclose for each of its subsidiaries that

have NCI that is material to the reporting entity:
name of each of its subsidiaries;
principal place of business;
proportion of ownership held by NCI;
the proportion of voting rights held by NCI;
profit or loss allocated to NCI;
accumulated NCI at the end of reporting period; and
summarised financial information.
IFRS Foundation
Disclosure of significant restrictions
62
Significant restrictions:
acess or use of assets
settlement of liabilities
Protective rights of NCI that restrict acess/use group

assets or settlement of liabilities.
Carrying amounts in consolidated financial statements
of the assets and liabilities to which restrictions apply.
IFRS Foundation
Disclosure of consolidated structured

entities
63
Terms of contractual arrangements that could require the

parent or its subsidiaries to provide financial support.
Financial or other support to a consolidated structured entity
(without contractual obligation):
type and amount of support provided; and
reasons for providing the support.
Financial or other support to a previously unconsolidated

structured entity (without contractual obligation) to which
such support resulted in control: explanation of relevant
factors in reaching decision.
Current intentions to provide support to a consolidated
structured entity.
IFRS Foundation
Disclosure of changes in parents

ownership interest
64
Without loss of control: schedule that shows the effects

on the equity attributable to owners of the parent of any
changes in its ownership interest.
With loss of control during the reporting period:
the portion of that gain or loss attributable to measuring
any investment retained in the former subsidiary at its
fair value at the date when control is lost; and
the line item(s) in profit or loss in which the gain or loss
is recognised (if not presented separately).
IFRS Foundation
Investment entities
IFRS Foundation
Investment entities: exception to

consolidation
66
Investment Entities (Amendments to IFRS 10, IFRS 12

and IAS 27), issued in October 2012, introduced an
exception to the principle that all subsidiaries shall be
consolidated.
Investment entities measure investments in subsidiaries
at fair value through profit or loss (in accordance with
IFRS 9 Financial Instruments) instead of consolidating
those subsidiaries (except for subsidiaries providing
investment-related services).
Disclosure requirements related to investment entities
are in IFRS 12 Disclosure of Interests in Other Entities.
IFRS Foundation
What is an investment entity?
67
An investment entity is an entity that:

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

entity
68
Purpose = capital appreciation, investment income or

both
It may provide investment-related services (directly or
through a subsidiary), to third parties as well as to its
investors
management services/strategic advice and financial
support to maximise the investment return (not separate
business activity or substantial source of income)
If a subsidiary provides such services : consolidate

Investment entities hold investment for a limited period
(ie an exit strategy must exist for any investment that
can be held indefinitely)
IFRS Foundation
Typical characteristics of an investment

entity
More than one investment

More than one investor
Unrelated investors
Ownership interests
IFRS Foundation
69
Example 16:* investment entities

is it an investment entity?
70
Limited Partnership: formed in 20X1 with a 10-year life.

Offering memo states purpose as to invest in entities
with rapid growth potential with the objective of realising
capital appreciation.
General Partner (GP)=1% of capital; 75 partners
(unrelated to GP)=remaining 99% of capital.
20X1 no investment; 20X2 one controlling interest;
20X3 investment in five additional companies.
No other activities other than investing.
Measures and evaluates investments in FV basis.
Plan to dispose of interests.
Refer to Example 1 in Illustrative Examples that accompany IFRS 10
*
IFRS Foundation

71
High Technology Fund invest in technology

startup companies for capital appreciation.
Technology Corporation controls HT Fund
(70% interest); remaining 30% owned by
10 unrelated investors.
TC holds option to acquire investments from HT
Fund.
No plans for exiting investments.
HT Fund is managed by an adviser that acts as
agent for the investors.
*
IFRS Foundation

72
Real Estate Entity develop, own and operate retail,

office and other commercial properties. Typically holds its
property in separate wholly-owned subsidiaries.
Does not have a set time frame for disposing of its
property investments.
Fair value is one performance indicator. Other measures
are used (expected cash flows, rental revenues and
expenses).
Real Estate Entity undertakes extensive property and
asset management activities. Development activity forms
a separate substantial part of Real Estate Entitys
business activities.
*
IFRS Foundation
Effective date and

transition
IFRS Foundation
Effective date
74 74
Annual periods beginning on or after 1 January

2013 (early application permitted)
Investment entities amendment effective 1 January
2014 (early application permitted)
IFRS Foundation
Transition relief
75
No retrospective adjustment required for entities

disposed of in the comparative period(s)
Requirement to present adjusted comparatives
limited to immediately preceding period
Comparative disclosures relating to unconsolidated
structured entities not required when IFRS 12 first
applied
IFRS Foundation

IFRS 10 and 12 CPD September 2013

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IFRS 10 and 12 CPD September 2013

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IFRS 10 Consolidated Financial

Disclaimer and allowed use

This PowerPoint presentation was prepared by IASB Education Initiative staff as a

Objective of consolidated financial statements and

Focus: preparation and presentation of consolidated

Question: Why are entities required to

Definition of asset based on control:

Do not want legal form to dictate financial

Link to the Conceptual Framework

Information must be useful to users in making

Link to the Conceptual Framework

Information about the economic entity (ie one

Information about the economic entity (ie a

Link to the Conceptual Framework

PRIMARY USERS OF FINANCIAL INFORMATION

DOES NOT CONTROL

Reasons for issuing

Reasons for issuing IFRS 10

The IASBs objective in issuing IFRS 10

An entity that is a parent shall present consolidated

Consolidated financial statements are the financial

IFRSs 7, 9, 10, 11 & 12 and IAS 28

Disclosures in accordance with

Define type of joint arrangement

Account for assets, liabilities, revenues

Account for an investment in

Disclosures in accordance with

Disclosures in accordance with

Scope of IFRS 10Exceptions

A parent need not present consolidated financial

Scope of IFRS 10Exceptions continued

IFRS 10 does not apply to post-employment benefit

The control modelan overview

An investor controls an investee when it is exposed, or has

Assessing control of an investee

Assessing power over an investee

Power = existing rights that give it the

An investor need not have absolute power to control an investee

Powerthe ability approach

Power over an investee = existing rights that give it the

Having the current ability is not limited to being able to

Only substantive rights must be considered in

Example 1A:* power

Investor A holds 45% of the voting rights of an

Refer to Example 7 in paragraph B45 of IFRS 10

Example 1B:* power

Investor A holds 45% of the voting rights of an

Refer to Example 6 in paragraph B44 of IFRS 10

Example 1C:* power

An investor acquires 48% of the voting rights of an

Refer to Example 4 in paragraph B43 of IFRS 10

Example 1D:* power

Investor A holds 35% of the voting rights of an investee.

Refer to Example 8 in paragraph B45 of IFRS 10

Example 1E:* power

Investor A holds 48% of the voting rights of an investee. The

Example 2:* power

Investor A holds 40% of the voting rights of an investee.

Refer to Example 5 in paragraph B43 of IFRS 10

Example 3A:* rights

Investor A holds 70% of the voting rights of an investee.

Refer to Example 9 in paragraph B50 of IFRS 10

Example 3B:* power

Investor A and two other investors each hold a third of