Month End Glossary

Control (IFRS 10)

Control, as defined under IFRS 10, determines whether an investor has influence over an investee based on power, exposure to variable returns, and the ability to affect those returns via its power.

Control, under the International Financial Reporting Standards (IFRS) 10 - Consolidated Financial Statements, refers to an investor's ability to influence and direct the operations and decisions of an investee due to possessing powers that grant such capacity. Control arises from three principal factors: the investor's power over the investee (usually indicated by voting rights or ownership percentages), the investor's exposure or rights to variable returns from its involvement with the investee, and the investor’s capacity to affect those returns through its power.

For instance, a company (the investor) may control its subsidiary (the investee) by holding majority shares and thereby influencing managerial decisions and sharing in the subsidiary's profit, which constitute variable returns. In the context of accounting, identifying and consolidating entities under the criterion of 'control' ensures an accurate representation of ownership and operational realities in the consolidated financial statements.

Such an analysis of control is fundamental to preparing financial reports that accurately reflect the financial positions and results of the businesses involved.

Examples of usage would include: "The parent company had control of the subsidiary, thereby requiring consolidation under IFRS 10 guidelines." Related terms include Consolidated Financial Statements, Investment Property, and Equity.

Related Terms

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