Collective control first, unanimity second

Learning objectives

• Distinguish the assessment of collective control (as defined in IFRS 10) from the assessment of unanimity among the parties that control collectively.L2
• Analyse, in a case in which several groups of parties could control, whether one of the parties can prevent the others from controlling.L3

Normative references

• IFRS 11 §8A party to an arrangement first assesses whether the contractual arrangement gives all the parties, or a group of the parties, control of the arrangement collectively, i.e. whether they must act together to direct the activities that significantly affect the returns of the arrangement (relevant activities). Joint control then exists only if decisions about those activities require the unanimous consent of the parties that collectively control (para. 9); the assessment of collective control is based on the definition of control in IFRS 10 (B5).

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

3 questions

• What approach does a party follow to determine whether it has joint control of an arrangement?L2
• An analyst writes: "Decisions about Orion's relevant activities require the agreement of Pôle and Quai; there is therefore joint control, with no need to examine whether Pôle and Quai control Orion collectively." What is the error in this reasoning?L2
• Mer SA, Lac SA and Fleuve SA hold 40%, 35% and 25% respectively of the voting rights of Delta SA. Under the agreement, decisions about Delta's relevant activities are taken at 70% or more of the voting rights (decision rule: case data, not a threshold of the standard). Write a short note analysing which groups of parties can decide, whether one party can prevent the others from controlling, and what follows for joint control, distinguishing rule, case facts and professional judgement.L3