Ifrs 10 vs Ias 27

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  • Topic: Subsidiary, Consolidation, Associate company
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  • Published : January 6, 2013
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IFRS 10 VS. IAS 27

1

IFRS 10 - OBJECTIVE
 To

establish
principles
for
the
presentation
and
preparation
of
consolidated financial statements (CFS)
when an entity controls one or more
other entities.

2

IFRS 10 – OBJECTIVE(STANDARDS)
Requires a parent entity to present CFS

Defines the principle of control and establishes
control as the basis for consolidation

Set out how to apply the principle of control to
identify wheteher an investor controls an investee
and therefore must consolidate the investee

Set out the accounting requirements for the
preparation of CFS

3

KEY DEFINITIONS
CFS

• FS of a group of the parent and its subsidiaries
presented as those of a single economic entity

CONTROL ON
INVESTEE

• Investor control an investee when the investor
is exposed

PARENT

• An entity that controls one or more entities

POWER

• Existing rights

PROTECTIVE
RIGHTS

• Rights to protect the interest of the party
holding the rights

RELEVANT
ACTIVITIES

• Activities of the investee that significantly
affect the investee’s returns

4

IFRS 10 - CONTROL
 An

investor determines whether it is a parent by
assessing whether it controls one or more investees.
 An investor considers all relevant facts and
circumstances when assessing whether it controls
an investee.
 An investor controls an investee when the investor 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
5

IFRS 10 - CONTROL
 An investor controls investee if and only if the

investor has all the following elements:-

POWER OF
THE
INVESTEE

EXPOSURE
OR RIGHTS

ABILITY TO
USE ITS
POWER

6

IFRS 10 - CONTROL
Power arise from rights
 Rights can be straightforward (through voting rights) or complex (embedded in contractual agreement)
 Investor holds only protective rights cannot have power
over an investee and cannot control investee
 An investor must not only have power over an investee
and exposure or rights to variable returns from its
involvement with the investee, a parent must also have
the ability to use its power over the investee to affect its returns from its involvement with the


7

IFRS 10 –

ACCOUNTING REQUIREMENTS
Preparation of CFS

A

parent prepares CFS using uniform
accounting policis for like transactions
and
other
events
in
similar
circumstances
 However, a parent need not present
CFS if it meets all the folllowing
conditions :8

IFRS 10 –

ACCOUNTING REQUIREMENTS
Wholly-owned subsidiary or partially-owned
subsidiary
Debt or equity instruments are not traded in
public market
Did not file or in the process of filing its FS
with Securities Commission
Ultimate or any intermediate parent of the
parent produces CFS

9

IFRS 10 –

ACCOUNTING REQUIREMENTS


Consolidation Procedures


CFS

Combine assets,
liablities, equity,
income, expenses
and cash flows

Eliminate carrying
amount

Eliminate in full
intragroup assets
and liabilities,
equity, income,
expenses an cash
flows

10

IFRS 10 –

ACCOUNTING REQUIREMENTS
 A reporting entity includes the income and

expenses of a subsidiary in the consolidated
financial statements
 The parent and subsidiaries are required to
have the same reporting dates, or consolidation
based on additional financial information
prepared by subsidiary, unless impracticable.

11

IFRS 10 –

ACCOUNTING REQUIREMENTS
 Non-Controlling Interests (NCIs)






A parent presents non-controlling interests in its
consolidated statement of financial position within
equity, separately from the equity of the owners of
the parent.
A reporting entity attributes the profit or loss and
each component of other comprehensive income to
the owners of the parent and to the non-controlling
interests.
The...
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