Structured entities

Learning objectives

• Identify an entity for which voting rights are not the dominant factor in deciding who controls it.L2, L3
• Analyse the purpose and design of a structured entity and the investor's involvement to determine who has power over it.L3

Normative references

• IFRS 10 §B8An investee may be designed so that voting rights are not the dominant factor in deciding who controls it, for example when voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements; the consideration of its purpose and design then includes the risks to which it was designed to be exposed, the risks it was designed to pass on to the parties involved and whether the investor is exposed to some or all of those risks, including upside potential.
• IFRS 10 §B51In considering the purpose and design of an investee, the investor considers its involvement and the decisions made at the investee's inception, and assesses whether the terms give it rights that are sufficient to give it power; being involved in the design is not sufficient to give control, but may indicate that the investor had the opportunity to obtain such rights.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• What characterises a structured entity in the analysis of control?L2
• To establish who has power over a structured entity, what does the investor consider? More than one answer is possible.L3