IFRS 10 "Consolidated Financial Statements"

IFRS 10 "Consolidated Financial Statements" is an international financial reporting standard that establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. Issued by the International Accounting Standards Board (IASB), IFRS 10 was developed to provide a single model for the control-based consolidation of all types of entities, including special purpose vehicles (SPVs) and subsidiaries. Here are some of the key aspects of IFRS 10:

1. Control as the Basis for Consolidation: The core principle of IFRS 10 is that an entity must consolidate all entities that it controls. Control exists when the parent has power over the investee, exposure or rights to variable returns from its involvement with the investee, and the ability to use its power over the investee to affect its returns.

2. Assessment of Control: The standard provides guidance on how to assess whether control exists, including scenarios where control is achieved through means other than voting rights (such as through contractual arrangements).

3. Dealing with Complex Structures: IFRS 10 helps in dealing with complex group structures, including multiple layers of subsidiaries and potential voting rights.

4. Potential Voting Rights and De Facto Control: The standard considers potential voting rights that are currently exercisable or convertible when assessing control. It also addresses situations where an entity has de facto control over another entity, even if it does not have the majority of voting rights.

5. Consolidation Procedures: IFRS 10 outlines the procedures for preparing consolidated financial statements, including how to account for changes in ownership interests, how to treat non-controlling interests, and the elimination of intra-group transactions and balances.

6. Disclosure Requirements: The standard requires disclosures that enable users of financial statements to evaluate the nature of the risks associated with interests in other entities and the effects of those interests on its financial position, financial performance, and cash flows.

7. Application to Special Purpose Entities (SPEs): IFRS 10 applies to all entities, including special purpose entities, removing the concept of 'risk and rewards' that was used under the previous standard (IAS 27 in conjunction with SIC-12).

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