What IFRS 10 covers

IFRS 10 Consolidated Financial Statements establishes the principle that a parent must present consolidated financial statements and defines control as the single basis for consolidation. It replaced IAS 27 (consolidated sections) and SIC-12, introducing a unified model that applies equally to traditional subsidiaries, structured entities, and investment funds.

Control exists when an investor has (1) power over relevant activities of the investee, (2) exposure (or rights) to variable returns, and (3) the ability to use that power to affect those returns (IFRS 10.6–7). All three elements must be present simultaneously.

Topics covered by IFRS 10

Control assessment

The starting point for any consolidation question. IFRS 10 requires a judgement-based assessment of all facts and circumstances, with ongoing reassessment whenever changes occur.

• Three elements of control → Power, variable returns, and the link between them — the core framework.
• De facto control → Control without a majority of voting rights, based on practical ability.
• Potential voting rights → Options, convertibles, and other instruments that may give additional power.
• Agent vs principal → When a fund manager or decision-maker controls rather than merely acts for others.
• Structured entities and SPEs → Assessing control where relevant activities are contractually predetermined.

Consolidation mechanics

Once control is established, IFRS 10 Appendix B sets out how to combine financial statements.

• Consolidation procedures → Step-by-step: uniform policies, acquisition-date fair values, line-by-line combination, elimination of intragroup items.
• Intragroup eliminations → Full elimination of intragroup balances, transactions, and unrealised profits.
• Non-controlling interests → Measurement (full goodwill vs proportionate), presentation within equity, profit allocation.

Changes in ownership and disposal

• Loss of control → Derecognition of assets and liabilities, retained interest at fair value, gain/loss calculation.

Scope exemptions

• Investment entity exception → When a PE/VC/fund parent measures subsidiaries at fair value instead of consolidating.

Key paragraphs at a glance

• IFRS 10.6–7 — Definition and three cumulative elements of control.
• IFRS 10.19–20 — Uniform accounting policies; consolidation from date of control.
• IFRS 10.22–23 — Non-controlling interests within equity; equity-only treatment of changes without loss of control.
• IFRS 10.25–26 — Loss of control: derecognition, retained interest, gain/loss recognition.
• IFRS 10.27–33 — Investment entity exemption and exceptions to the exemption.
• IFRS 10.B58–B72 — Agent vs principal indicators.
• IFRS 10.B86–B99 — Consolidation procedures in detail.