IFRS 10 - Consolidated Financial Statements


IFRS 10 Consolidated Financial Statements establishes the principles for presenting and preparing consolidated financial statements when an entity controls one or more other entities. As follows:

  1. Requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
  2. Defines the principle of control, and establishes control as the basis for consolidation;
  3. Sets out how to apply the principle of control to identify whether an investor controls an investee and therefore must consolidate the investee;
  4. Sets out the accounting requirements for the preparation of consolidated financial statements.; and
  5. Defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity.

IFRS 10 does not cover the accounting requirements for business combinations and the effect of a business combination on the consolidated financial statements, including goodwill arising in a business combination (as defined in IFRS 3 - Business Combinations).

Conversion issues




IFRS 10 and VAS 25 – Consolidated Financial Statements



An investor controls an investee if and only if the investor has all following three (3) elements:

(a) Power over the investee;

(b) Exposure, or rights, to variable returns from its involvement with the investee; and

(c) The ability to use its power over the investee to affect the amount of the investor's returns.


Where an entity holds more than 50% or more of the voting power (directly or through subsidiaries) on an investee, it will be presumed the investor has control over its investee, except in special cases ownership is not associated with control. In the following cases, control still exists even if the parent company holds less than 50% of the voting power in the subsidiary:

(a) Other investors agree to give the parent company more than 50% of the voting rights;

(b) The parent company has the right to govern the financial and operating policies under the agreed regulations;

(c) The parent company has the right to appoint or remove the majority of the members of the Board of Directors or equivalent management level;

(d) The parent company has the right to cast the majority of votes at meetings of the Board of Directors or equivalent management level.

Determine investment entity

The parent company must determine whether it is an investment entity. An investment entity needs to qualify following characteristics:

(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.

Not mentioned

Consolidation exemption for investment entities

Where an entity meets the definition of an "investment entity", it does not consolidate its subsidiaries or apply IFRS 3 Business Combinations when it obtains control of another entity. Instead, the investment entity must determine the value of the investment in the subsidiary at fair value through the statement of profit and loss as prescribed in IFRS 9.

If an investment entity has

a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services that relate to the investment entity’s investment activities, it shall consolidate that subsidiary in accordance with paragraphs 19–26 of this IFRS and apply the requirements of IFRS 3 to the acquisition of any such subsidiary.

A parent of an investment entity shall consolidate all entities that it controls, including those controlled through an investment entity subsidiary, unless the parent itself is an investment entity.

Not mentioned

Not required to present consolidated financial statements

A parent company does not need to present consolidated financial statements if it meets all the following four (4) conditions:

  1. It is a wholly owned subsidiary or is a partially owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statement;
  2. Its debt or entity instruments are not traded in a public market (domestic, foreign stock exchange or OTC market, including local and regional markets);
  3. It did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organization to issue any class of instruments in a public market, and
  4. Its ultimate or any intermediate parent of the parent produces consolidated financial statements available for public use that comply with IFRS.

A parent that is a wholly owned subsidiary, or is virtually wholly owned, need not present consolidated financial statements provided, in the case of one that is virtually wholly owned, the parent obtains the approval of the owners of the minority interest.

Non-controlling interests

Non-controlling interests shall be presented in the consolidated statement of financial position with equity, separately from the equity of the owners of the parent.

The term "minority interest" is used in place of "non-controlling interest" and shall be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parents.

Changes in a parent's ownership interest in a subsidiary that does not result in a loss of control are accounted for as equity transactions (i.e. Transactions with owners in their capacity as owners).

Not mentioned

Losing control

If a parent loses control of a subsidiary, the parent:

(a) Derecognises the assets and liabilities of the former subsidiary from the consolidated statement of financial position.

(b) Recognises any investment retained in the former subsidiary when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant IFRSs. That retained interest is remeasured and the remeasured value is regarded as the fair value on initial recognition of a financial asset in accordance with IFRS 9 Financial Instruments or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture.

(c) Recognises the gain or loss associated with the loss of control attributable to the former controlling interest.

Not mentioned

What must be done?

  • Determine whether the company is exempted from preparing consolidated financial statements.
  • Redefine subsidiaries and entities controlled by the parent company in accordance with IFRS 10.
  • Pay attention to accounting handling when changing interest rates or losing control at affiliated entities.
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