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IFRS 10 Summary Notes

IFRS 10 Consolidated Financial Statements

INTRODUCTION

DEFINED TERMS
Consolidated The financial statements of a group in which the assets, liabilities, equity, income,
financial expenses and cash flows of the parent and its subsidiaries are presented as those
statements of a single economic entity.
An investor controls an investee when the investor is exposed, or has rights, to
Control of an
variable returns from its involvement with the investee and has the ability to affect
investee
those returns through its power over the investee.
An entity that:
(a) obtains funds from one or more investors for the purpose of providing those
investor(s) with investment management services
Investment
(b) commits to its investor(s) that its business purpose is to invest funds solely
entity
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.
Parent An entity that controls one or more entities.
Power Existing rights that give the current ability to direct the relevant activities.
Protective Rights designed to protect the interest of the party holding those rights without
rights giving that party power over the entity to which those rights relate.
Relevant Activities of the investee that significantly affect the investee's returns.
activities

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
Determining circumstances when assessing whether it controls an investee. An investor
control controls an investee when it 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.
An investor controls an investee if and only if the investor has all of the following
elements:
(a) power over the investee, i.e. the investor has existing rights that give it
the ability to direct the relevant activities (the activities that significantly
Elements of
affect the investee's returns);
Control
(b) exposure, or rights, to variable returns from its involvement with the
investee;
(c) the ability to use its power over the investee to affect the amount of the
investor's returns.
Such rights can be straightforward (e.g. through voting rights) or be complex
Power arises (e.g. embedded in contractual arrangements). An investor that holds only
from rights protective rights cannot have power over an investee and so cannot control an
investee.

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IFRS 10 Summary Notes

An investor must be exposed, or have rights, to variable returns from its


Exposure to
involvement with an investee to control the investee. Such returns must have
variable
the potential to vary as a result of the investee's performance and can be
returns
positive, negative, or both.
A parent must not only have power over an investee and exposure or rights to
Ability to use variable returns from its involvement with the investee, a parent must also have
power the ability to use its power over the investee to affect its returns from its
involvement with the investee.
When assessing whether an investor controls an investee an investor with
Determining
decision-making rights determines whether it acts as principal or as an agent of
status as
other parties. A number of factors are considered in making this assessment.
principal or
For instance, the remuneration of the decision-maker is considered in
agent
determining whether it is an agent.

ACCOUNTING REQUIREMENT AND EXEMPTIONS

A parent prepares consolidated financial statements using uniform accounting


Requirement
policies for like transactions and other events in similar circumstances.
However, a parent need not present consolidated financial statements if it meets
all of the following conditions:
(a) 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 statements
(b) its debt or equity instruments are not traded in a public market (a domestic
Exemption or foreign stock exchange or an over-the-counter market, including local
Criteria and regional markets)
(c) it did not file, nor is it in the process of filing, its financial statements with a
securities commission or other regulatory organisation for the purpose of
issuing any class of instruments in a public market, and
(d) its ultimate or any intermediate parent of the parent produces financial
statements available for public use that comply with IFRSs, in which
subsidiaries are consolidated or are measured at fair value through profit or
loss in accordance with IFRS 10.
Investment Investment entities are prohibited from consolidating particular subsidiaries.
entities
Furthermore, post-employment benefit plans or other long-term employee benefit
Employment
plans to which IAS 19 Employee Benefits applies are not required to apply the
benefit plans
requirements of IFRS 10.

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IFRS 10 Summary Notes

CONSOLIDATION PROCEDURES

CONSOLIDATED FINANCIAL STATEMENTS


combine like items of assets, liabilities, equity, income, expenses and cash flows
Combine
of the parent with those of its subsidiaries.
offset (eliminate) the carrying amount of the parent's investment in each
Offset
subsidiary and the parent's portion of equity of each subsidiary.
 eliminate in full intragroup assets and liabilities, equity, income, expenses and
cash flows relating to transactions between entities of the group (profits or losses
Eliminate
resulting from intragroup transactions that are recognised in assets, such as
inventory and fixed assets, are eliminated in full).
 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
Only post-
the reporting entity ceases to control the subsidiary. Income and expenses of the
acquisition
subsidiary are based on the amounts of the assets and liabilities recognised in the
consolidated financial statements at the acquisition date.

REPORTING DATES
The parent and subsidiaries are required to have the same reporting dates, or
Same dates consolidation based on additional financial information prepared by subsidiary,
unless impracticable.
Where impracticable, the most recent financial statements of the subsidiary are
If
used, adjusted for the effects of significant transactions or events between the
Impracticable
reporting dates of the subsidiary and consolidated financial statements.
Maximum The difference between the date of the subsidiary's financial statements and that
Difference of the consolidated financial statements shall be no more than three months.

NON-CONTROLLING INTERESTS
Statement of A parent presents non-controlling interests in its consolidated statement of
financial financial position within equity, separately from the equity of the owners of the
position 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 proportion allocated to the parent and non-controlling interests
Statement of
are determined on the basis of present ownership interests.
comprehensive
income
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.

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IFRS 10 Summary Notes

CHANGES IN GROUP STRUCTURE

DISPOSAL / ACQUISITION NOT RESULTING IN LOSS OF CONTROL


Changes in a parent's ownership interest in a subsidiary that do not result in the
Nature parent losing control of the subsidiary are equity transactions (i.e. transactions
with owners in their capacity as owners).
When the proportion of the equity held by non-controlling interests changes, the
Adjustment carrying amounts of the controlling and non-controlling interests area adjusted to
reflect the changes in their relative interests in the subsidiary.
Any difference between the amount by which the non-controlling interests are
Difference adjusted and the fair value of the consideration paid or received is recognised
directly in equity and attributed to the owners of the parent.

DISPOSAL RESULTING IN LOSS OF 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
Accounting
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.
Transaction If a parent loses control of a subsidiary that does not contain a business in a
with transaction with an associate or a joint venture gains or losses resulting from
associate or those transactions are recognised in the parent's profit or loss only to the extent of
JV the unrelated investors' interests in that associate or joint venture.

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IFRS 10 Summary Notes

INVESTMENT ENTITY

ASSESSING AN INVESTMENT ENTITY


An entity is required to consider all facts and circumstances when assessing
whether it is an investment entity, including its purpose and design. IFRS 10
provides that an investment entity should have the following typical
characteristics:
Characteristics
(a) it has more than one investment
(b) it has more than one investor
(c) it has investors that are not related parties of the entity
(d) it has ownership interests in the form of equity or similar interests.
The absence of any of these typical characteristics does not necessarily
Substance
disqualify an entity from being classified as an investment entity.
An investment entity is required to measure an investment in a subsidiary at fair
Accounting value through profit or loss in accordance with IFRS 9 Financial
Instruments or IAS 39 Financial Instruments:

ACCOUNTING REQUIREMENT
An investment entity is required to measure an investment in a subsidiary at fair
FVTPL value through profit or loss in accordance with IFRS 9 Financial
Instruments or IAS 39 Financial Instruments:
Consolidation However, an investment entity is still required to consolidate a subsidiary where
to related that subsidiary provides services that relate to the investment entity’s inve stment
business activities.
subsidiary
No Because an investment entity is not required to consolidate its subsidiaries,
elimination intragroup related party transactions and outstanding balances are not eliminated.
Special Special requirements apply where an entity becomes, or ceases to be, an
accounting investment entity.
The exemption from consolidation only applies to the investment entity itself.
Exemption Accordingly, a parent of an investment entity is required to consolidate all entities
Restriction that it controls, including those controlled through an investment entity subsidiary,
unless the parent itself is an investment entity.

Dated: 21 November 2016

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