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Group accounting – Basic groups

Control

4.1 Definitions

Consolidated statements are produced if one entity controls another entity.

According to IFRS 10, an investor controls an investee when:

 the investor has power over the investee

 the investor is exposed to, or has rights to, variable returns from
the investee

 the investor can affect its returns through its power.

Investors should consider:

 whether they exercise the majority of votes

 agreements with other investors

 whether other shareholdings are dispersed

 whether they hold potential voting rights resulting from convertible debt or
options that are currently capable of being exercised.

Illustrations and further practice

You can now attempt TYU question 1 from Chapter 19

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