The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.
[IFRS 10:1] The Standard: [IFRS 10:1] 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 * Added by Investment Entities amendments, effective 1 January 2014.
An investment entity is required to measure an investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and Measurement.
[IFRS ] However, an investment entity is still required to consolidate a subsidiary where that subsidiary provides services that relate to the investment entity’s investment activities.
[IFRS 10: B88] The parent and subsidiaries are required to have the same reporting dates, or consolidation based on additional financial information prepared by subsidiary, unless impracticable.
Where impracticable, the most recent financial statements of the subsidiary are used, adjusted for the effects of significant transactions or events between the reporting dates of the subsidiary and consolidated financial statements.
[Note: The investment entity consolidation exemption was introduced by Investment Entities, issued on 31 October 2012 and effective for annual periods beginning on or after 1 January 2014.] IFRS 10 contains special accounting requirements for investment entities.
Where an entity meets the definition of an 'investment entity' (see above), it does not consolidate its subsidiaries, or apply IFRS 3 Business Combinations when it obtains control of another entity.
[IFRS 10: B94, IFRS 10: B89] The reporting entity also attributes total comprehensive income to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.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 that holds only protective rights cannot have power over an investee and so cannot control an investee [IFRS , IFRS ].[IFRS 10:4B] Consolidation procedures Consolidated financial statements: [IFRS 10: B86] A reporting entity includes the income and expenses of a subsidiary in the consolidated financial statements from the date it gains control until the date when the reporting entity ceases to control the subsidiary.Income and expenses of the subsidiary are based on the amounts of the assets and liabilities recognised in the consolidated financial statements at the acquisition date.[IFRS ] However, a parent need not present consolidated financial statements if it meets all of the following conditions: [IFRS 10:4(a)] Investment entities are prohibited from consolidating particular subsidiaries (see further information below).