IFRS 10 — Consolidated Financial Statements Quick Article Links Overview IFRS 10 Con­sol­i­dated Financial State­ments outlines the re­quire­ments for the prepa­ra­tion and pre­sen­ta­tion of con­sol­i­dated financial state­ments, requiring entities to con­sol­i­date entities it controls. Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee. IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January 2013. History of IFRS 10 Date April 2002 De­vel­op­ment Comments Project on con­sol­i­da­tion added to the IASB's agenda (project history (https://www.iasplus.com/en/projects/completed/consol/consolidation)) 18 December 2008 ED 10 Con­sol­i­dated Financial State­ments published Comment (https://www.iasplus.com/en/news/2008/December/news3910) deadline 20 March 2009 29 September 2010 Staff draft of IFRS X Con­sol­i­dated Financial State­ments published (https://www.iasplus.com/en/news/2010/September/news6305) 12 May 2011 IFRS 10 Con­sol­i­dated Financial State­ments published Effective (https://www.iasplus.com/en/news/2011/May/news6910) for annual periods beginning on or after 1 January 2013 28 June 2012 Amended by Con­sol­i­dated Financial State­ments, Joint Arrange­ments Effective (https://www.iasplus.com/en/news/2012/june/iasb-amendsand Dis­clo­sure of Interests in Other Entities: Tran­si­tion Guidance for annual transition-guidance-for-ifrs-10) (project history periods be(https://www.iasplus.com/en/projects/completed/consol/ifrs-10-2013- ginning on transitional-requirements)) or after 1 January 2013 31 October 2012 Amended by In­vest­ment Entities (Amend­ments to IFRS 10, IFRS 12 Effective (https://www.iasplus.com/en/news/2012/october/investment- and IAS 27) (project history for annual entities-amendments) (https://www.iasplus.com/en/projects/completed/consol/investment- periods beentities)) ginning on or after 1 January 2014 11 September 2014 Amended by Sale or Con­tri­bu­tion of Assets between an Investor and Effective (https://www.iasplus.com/en/news/2014/09/ifrs-10-ias-28) its Associate or Joint Venture (Amend­ments to IFRS 10 and IAS 28) for annual periods beginning on or after 1 January 2016 deferred in­def­i­nitely (see below) 18 December 2014 Amended by In­vest­ment Entities: Applying the Con­sol­i­da­tion Effective (https://www.iasplus.com/en/news/2014/12/investment-entities)Exception (Amend­ments to IFRS 10, IFRS 12 and IAS 28) (project for annual history (https://www.iasplus.com/en/projects/completed/consol/ifrs-10- periods beias-28-investment-entity-amendments)) ginning on or after 1 January 2016 17 December 2015 Amended by Effective Date of Amend­ments to IFRS 10 and IAS 28 defer the (https://www.iasplus.com/en/news/2015/12/ifrs-10-ias-28) effective date of the September 2014 amend­ments to these standards in­def­i­nitely Related In­ter­pre­ta­tions IFRS 10 su­per­seded SIC-12 (https://www.iasplus.com/en/standards/sic/sic-12) Con­sol­i­da­tion – Special Purpose Entities Amend­ments under con­sid­er­a­tion by the IASB Post-im­ple­men­ta­tion review — IFRS 10, IFRS 11, and IFRS 12 (https://www.iasplus.com/en/projects/pir/ifrs-10-12) Common control trans­ac­tions (https://www.iasplus.com/en/projects/research/short-term/common-control) IFRS 13 — Unit of account (https://www.iasplus.com/en/projects/completed/other/ifrs-13-unit-of-account) Pub­li­ca­tions and resources IFRS in Focus Newslet­ter IASB issues new standard on con­sol­i­da­tion (https://www.iasplus.com/en/publications/global/ifrs-infocus/2011/ifrs-10) sum­maris­ing the re­quire­ments of IFRS 10 (PDF 82k, May 2011) Deloitte IFRS Podcast (https://www.iasplus.com/en/publications/global/podcasts/deloitte-ifrs-podcast-ifrs-10-consolidated-financialstatements) (May 2011, 12 minutes, 8mb) Effect analysis for IFRS 10 and IFRS 12 (http://archive.ifrs.org/Alerts/ProjectUpdate/Documents/EffectAnalysisIFRS10IFRS12Sept2011.pdf) (link to IASB website) Summary of IFRS 10 Objective 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] requires a parent entity (an entity that controls one or more other entities) to present con­sol­i­dated financial state­ments defines the principle of control, and es­tab­lishes control as the basis for con­sol­i­da­tion set out how to apply the principle of control to identify whether an investor controls an investee and therefore must con­sol­i­date the investee sets out the accounting re­quire­ments for the prepa­ra­tion of con­sol­i­dated financial state­ments defines an in­vest­ment entity and sets out an exception to con­sol­i­dat­ing par­tic­u­lar sub­sidiaries of an in­vest­ment entity*. * Added by In­vest­ment Entities amend­ments, effective 1 January 2014. Key de­f­in ­ ­it­ ions [IFRS 10:Appendix A] Con­sol­id ­ ated financial state­ments The financial state­ments of a group in which the assets, li­a­bil­i­ties, equity, income, expenses and cash flows of the parent and its sub­sidiaries are presented as those of a single economic entity Control of an investee 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 In­vest­ment entity* An entity that: 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. Parent An entity that controls one or more entities Power Existing rights that give the current ability to direct the relevant ac­tiv­i­ties Pro­tec­tive rights Rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights relate Relevant ac­tiv­it­ ies Ac­tiv­i­ties of the investee that sig­nif­i­cantly affect the investee's returns * Added by In­vest­ment Entities amend­ments, effective 1 January 2014. 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 cir­cum­stances when assessing whether it controls an investee. An investor 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. [IFRS 10:5-6; IFRS 10:8] An investor controls an investee if and only if the investor has all of the following elements: [IFRS 10:7] 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 affect the investee's returns) exposure, or rights, to variable returns from its in­volve­ment with the investee the ability to use its power over the investee to affect the amount of the investor's returns. Power arises from rights. Such rights can be straight­for­ward (e.g. through voting rights) or be complex (e.g. embedded in con­trac­tual arrange­ments). An investor that holds only pro­tec­tive rights cannot have power over an investee and so cannot control an investee [IFRS 10:11, IFRS 10:14]. An investor must be exposed, or have rights, to variable returns from its in­volve­ment with an investee to control the investee. Such returns must have the potential to vary as a result of the investee's per­for­mance and can be positive, negative, or both. [IFRS 10:15] A parent must not only have power over an investee and exposure or rights to variable returns from its in­volve­ment with the investee, a parent must also have the ability to use its power over the investee to affect its returns from its in­volve­ment with the investee. [IFRS 10:17]. When assessing whether an investor controls an investee an investor with de­ci­sion-mak­ing rights de­ter­mines whether it acts as principal or as an agent of other parties. A number of factors are con­sid­ered in making this as­sess­ment. For instance, the re­mu­ner­a­tion of the de­ci­sionmaker is con­sid­ered in de­ter­min­ing whether it is an agent. [IFRS 10:B58, IFRS 10:B60] Accounting re­quire­ments Prepa­ra­tion of con­sol­id ­ ated financial state­ments A parent prepares con­sol­i­dated financial state­ments using uniform accounting policies for like trans­ac­tions and other events in similar cir­cum­stances. [IFRS 10:19] However, a parent need not present con­sol­i­dated financial state­ments if it meets all of the following con­di­tions: [IFRS 10:4(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 its debt or equity in­stru­ments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets) 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 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.* * Fair value mea­sure­ment clause added by In­vest­ment Entities: Applying the Con­sol­i­da­tion Exception (Amend­ments to IFRS 10, IFRS 12 and IAS 28) amend­ments, effective 1 January 2016. In­vest­ment entities are pro­hib­ited from con­sol­i­dat­ing par­tic­u­lar sub­sidiaries (see further in­for­ma­tion below). Fur­ther­more, post-em­ploy­ment benefit plans or other long-term employee benefit plans to which IAS 19 (https://www.iasplus.com/en/standards/ias/ias19) Employee Benefits applies are not required to apply the re­quire­ments of IFRS 10. [IFRS 10:4B] Con­sol­id ­ a­tion pro­ce­dures Con­sol­i­dated financial state­ments: [IFRS 10:B86] combine like items of assets, li­a­bil­i­ties, equity, income, expenses and cash flows of the parent with those of its sub­sidiaries offset (eliminate) the carrying amount of the parent's in­vest­ment in each sub­sidiary and the parent's portion of equity of each sub­sidiary (IFRS 3 (https://www.iasplus.com/en/standards/ifrs/ifrs3) Business Com­bi­na­tions explains how to account for any related goodwill) eliminate in full in­tra­group assets and li­a­bil­i­ties, equity, income, expenses and cash flows relating to trans­ac­tions between entities of the group (profits or losses 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 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 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. The dif­fer­ence between the date of the sub­sidiary's financial state­ments and that of the con­sol­i­dated financial state­ments shall be no more than three months [IFRS 10:B92, IFRS 10:B93] Non-con­trol­ling interests (NCIs) A parent presents non-con­trol­ling interests in its con­sol­i­dated statement of financial position within equity, sep­a­rately from the equity of the owners of the parent. [IFRS 10:22] A reporting entity at­trib­utes the profit or loss and each component of other com­pre­hen­sive income to the owners of the parent and to the noncon­trol­ling interests. The pro­por­tion allocated to the parent and non-con­trol­ling interests are de­ter­mined on the basis of present ownership interests. [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. [IFRS 10:B94] Changes in ownership interests Changes in a parent's ownership interest in a sub­sidiary that do not result in the 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 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 adjusted and the fair value of the con­sid­er­a­tion paid or received is recog­nised directly in equity and at­trib­uted to the owners of the parent.[IFRS 10:23, IFRS 10:B96] If a parent loses control of a sub­sidiary, the parent [IFRS 10:25]: dere­cog­nises the assets and li­a­bil­i­ties of the former sub­sidiary from the con­sol­i­dated statement of financial position 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 (https://www.iasplus.com/en/standards/ifrs/ifrs9) Financial In­stru­ments or, when ap­pro­pri­ate, the cost on initial recog­ni­tion of an in­vest­ment in an associate or joint venture recog­nises the gain or loss as­so­ci­ated with the loss of control at­trib­ut­able to the former con­trol­ling interest. If a parent loses control of a sub­sidiary that does not contain a business in a trans­ac­tion with an associate or a joint venture gains or losses resulting from those trans­ac­tions are recog­nised in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture.* * Added by Sale or Con­tri­bu­tion of Assets between an Investor and its Associate or Joint Venture amend­ments, effective 1 January 2016, however, the effective date of the amendment was later deferred in­def­i­nitely. In­vest­ment entities con­sol­id ­ a­tion exemption [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 (https://www.iasplus.com/en/standards/ifrs/ifrs3) Business Com­bi­na­tions when it obtains control of another entity. [IFRS 10:31] 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 [IFRS 10:28]: it has more than one in­vest­ment it has more than one investor it has investors that are not related parties of the entity it has ownership interests in the form of equity or similar interests. The absence of any of these typical char­ac­ter­is­tics does not nec­es­sar­ily dis­qual­ify an entity from being clas­si­fied as an in­vest­ment entity. An in­vest­ment entity is required to measure an in­vest­ment in a sub­sidiary at fair value through profit or loss in ac­cor­dance with IFRS 9 (https://www.iasplus.com/en/standards/ifrs/ifrs9) Financial In­stru­ments or IAS 39 (https://www.iasplus.com/en/standards/ias/ias39) Financial In­stru­ments: Recog­ni­tion and Mea­sure­ment. [IFRS 10:31] 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 10:32]* * In­vest­ment Entities: Applying the Con­sol­i­da­tion Exception (Amend­ments to IFRS 10, IFRS 12 and IAS 28) clarifies, effective 1 January 2016, that this relates to 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. Because an in­vest­ment entity is not required to con­sol­i­date its sub­sidiaries, in­tra­group related party trans­ac­tions and out­stand­ing balances are not elim­i­nated [IAS 24.4, IAS 39.80]. Special re­quire­ments apply where an entity becomes, or ceases to be, an in­vest­ment entity. [IFRS 10:B100-B101] The exemption from con­sol­i­da­tion only applies to the in­vest­ment entity itself. Ac­cord­ingly, a parent of an in­vest­ment entity is required to con­sol­i­date all entities that it controls, including those con­trolled through an in­vest­ment entity sub­sidiary, unless the parent itself is an in­vest­ment entity. [IFRS 10:33] Dis­clo­sure There are no dis­clo­sures specified in IFRS 10. Instead, IFRS 12 (https://www.iasplus.com/en/standards/ifrs/ifrs12) Dis­clo­sure of Interests in Other Entities outlines the dis­clo­sures required. Ap­plic­a­bil­ity and early adoption Note: This section has been updated to reflect the amend­ments to IFRS 10 made in June 2012 and October 2012. IFRS 10 is ap­plic­a­ble to annual reporting periods beginning on or after 1 January 2013 [IFRS 10:C1]. Ret­ro­spec­tive ap­pli­ca­tion is generally required in ac­cor­dance with IAS 8 (https://www.iasplus.com/en/standards/ias/ias8) Accounting Policies, Changes in Accounting Estimates and Errors [IFRS 10:C2]. However, an entity is not required to make ad­just­ments to the accounting for its in­volve­ment with entities that were pre­vi­ously con­sol­i­dated and continue to be con­sol­i­dated, or entities that were pre­vi­ously un­con­sol­i­dated and continue not to be con­sol­i­dated at the date of initial ap­pli­ca­tion of the IFRS [IFRS 10:C3]. Fur­ther­more, an entity is not required to present the quan­ti­ta­tive in­for­ma­tion required by paragraph 28(f) of IAS 8 for the annual period im­me­di­ately preceding the date of initial ap­pli­ca­tion of the standard (the beginning of the annual reporting period for which IFRS 10 is first applied) [IFRS 10:C2A-C2B]. However, an entity may choose to present adjusted com­par­a­tive in­for­ma­tion for earlier reporting periods, any must clearly identify any un­ad­justed com­par­a­tive in­for­ma­tion and explain the basis on which the com­par­a­tive in­for­ma­tion has been prepared [IFRS 10.C6A-C6B]. IFRS 10 pre­scribes modified accounting on its first ap­pli­ca­tion in the following cir­cum­stances: an entity con­sol­i­dates an entity not pre­vi­ously con­sol­i­dated [IFRS 10:C4-C4C] an entity no longer con­sol­i­dates an entity that was pre­vi­ously con­sol­i­dated [IFRS 10:C5-C5A] in relation to certain amend­ments to IAS 27 made in 2008 that have been carried forward into IFRS 10 [IFRS 10:C6]. An entity may apply IFRS 10 to an earlier accounting period, but if doing so it must disclose the fact that is has early adopted the standard and also apply: IFRS 11 (https://www.iasplus.com/en/standards/ifrs/ifrs11) Joint Arrange­ments IFRS 12 (https://www.iasplus.com/en/standards/ifrs/ifrs12) Dis­clo­sure of Interests in Other Entities IAS 27 (https://www.iasplus.com/en/standards/ias/ias27-2011) Separate Financial State­ments (as amended in 2011) IAS 28 (https://www.iasplus.com/en/standards/ias/ias28-2011) In­vest­ments in As­so­ci­ates and Joint Ventures (as amended in 2011). The amend­ments made by In­vest­ment Entities are ap­plic­a­ble to annual reporting periods beginning on or after 1 January 2014 [IFRS 10:C1B]. At the date of initial ap­pli­ca­tion of the amend­ments, an entity assesses whether it is an in­vest­ment entity on the basis of the facts and cir­cum­stances that exist at that date and ad­di­tional tran­si­tional pro­vi­sions apply [IFRS 10:C3B–C3F]. Contact us (/en/footer/contact-us) About (/en/footer/about) Legal (/en/footer/legal) Privacy (/en/footer/privacy) Cookies (/en/footer/cookies) FAQs (/en/footer/faqs) © 2022. See Legal (http://www.iasplus.com/en/footer/legal) for more information. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ("DTTL"), its global network of member firms and their related entities. DTTL (also referred to as "Deloitte Global") and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. 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