IFRS 10: Consolidated Financial Statements

IFRS 10 "Consolidated Financial Statements" establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. The standard replaced IAS 27 "Consolidated and Separate Financial Statements" and SIC-12 "Consolidation—Special Purpose Entities." The core principle of IFRS 10 is to provide a single consolidation model that identifies control as the basis for consolidation for all types of entities. Key aspects of IFRS 10 include:

1. Definition of Control: Control exists when an investor is exposed to, 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.

2. Assessment of Control: The assessment of control includes considering potential voting rights and de facto power, as well as whether the investor is a principal or an agent. The determination of control is based on whether an investor has power over the investee, exposure to variable returns from the investee, and the ability to use its power over the investee to affect the amount of the investor's returns.

3. Consolidation Procedures: Once control is established, an entity is required to consolidate the controlled investees by combining like items of assets, liabilities, equity, income, expenses, and cash flows.

4. Disclosure Requirements: IFRS 10 requires disclosures in consolidated financial statements that enable users to evaluate the nature of, and risks associated with, an entity’s interests in other entities, and the effects of those interests on the financial position, financial performance, and cash flows.

5. Accounting for Non-controlling Interests: Non-controlling interests must be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent.

6. Loss of Control: The standard addresses accounting requirements upon the loss of control of a subsidiary, including recognizing any gain or loss in profit or loss.

7. Special Purpose Entities (SPEs): IFRS 10 provides guidance on assessing control of SPEs, requiring a focus on the substance of the relationship rather than merely the form of the arrangements.

8. Uniform Accounting Policies: For consolidation purposes, an entity must use uniform accounting policies for like transactions and events in similar circumstances.

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