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Chapter 19

IFRS 10 Consolidated Financial Statements specifies three criteria that must apply if
one entity is to have control of another as follows:

 ‘power over the investee, which is normally exercised through the
majority of voting rights (i.e. owning more than 50% of the equity shares),
and

 exposure or rights to variable returns from involvement (e.g. a dividend),
and

 the ability to use power over the investee to affect the amount of investor
returns’. (IFRS 10, para 7).

’Power’ is normally regarded as the ability of the parent to direct the activities of the
subsidiary that significantly affect returns that will be generated – i.e. the strategic,
financial and operational policies.

 In group accounting questions, control is normally indicated when one entity
owns a majority (in excess of 50%) of the equity shares of another entity.

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