Page 307 - F1 Integrated Workbook STUDENT 2018

Consolidated Statement of Financial Position

What is a group?

1.1 What is a Group?

 A group exists where one company controls another company.

 Control is the power to govern the financial and operating policies of another
company, so as to obtain benefits from its activities.

 Control is normally achieved by the parent company owning more than 50% of
the voting rights of the subsidiary.

Note that this accounting treatment decision involves the exercise of judgement. It is
not necessarily a simple ‘yes’ or ‘no’ answer to determine whether one entity has
control of another – there are other relevant factors.

In most exam questions the investment will be treated as a subsidiary if there is a
shareholding of then 50% or control can be shown, and will be treated as an
associate when there is a shareholding between 20-50%, or significant influence can
be shown. However do not make assumptions regarding subsidiaries and
associates, in both cases they are not solely dependent upon shareholding.

297