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WorkpaperIFRS 10 — Consolidated Financial StatementsL1 · L2 · L3 · L4

Assessing control of an investee: power, variable returns, link, principal or agent, reassessment, parent exemption and investment entity status

10 missions8 sections to document60 min
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Status
Published

Objective of the workpaper

Describe the investee, its relevant activities and the rights of each party, list the investor’s variable returns, then support each judgment: power, de facto control or potential rights, principal or agent, reassessment, parent exemption. Percentages, fees and amounts are case data: no threshold is presented as imposed by the standard, and control remains a judgment supported by the facts.

8 sections · 35 blocks · 3 calculations · 0 entries

  • IFRS 10 §7
  • IFRS 10 §8
  • IFRS 10 §4
  • IFRS 10 §B22
  • IFRS 10 §B41
  • IFRS 10 §B58

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

10 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity
Control of an entity: power, substantive and protective rights, variable returns, link, parent exemption and first consolidation eliminations
Case tasks documented here
  • Must Marvane Holding present consolidated financial statements? Check each condition of the exemption.
  • Ostrel: identify the relevant activities, the existing rights and whether they are substantive, the variable returns and the link, then conclude on control.
  • Pentrix: do Marvane’s veto rights give it power? Conclude on control.
  • Ostrel: compute Marvane’s investment eliminated against Ostrel’s equity and the amount of non-controlling interests to present in consolidated equity.
1

Facts and data

Inputs

  • Investee: purpose and design, relevant activities and who directs them

    TextRequired

    PRODUCTION_PRICING_BUDGET_DECIDED_BY_SIMPLE_MAJORITY_OF_VOTES

  • Rights of the parties: voting rights, contractual arrangements, removal rights and protective rights

    Text

    SIXTY_PERCENT_OF_VOTES_NO_BARRIER_TO_EXERCISE

  • Voting rights held by the investor (%)

    Number

    60 %

  • Voting rights the investor would hold by exercising its substantive potential rights (%)

    Number

  • Additional voting rights obtained by exercising the option (%)

    Number

  • Weight of the investor’s voting rights in the votes cast at recent meetings (%)

    Number

  • Average attendance at recent meetings (% of voting rights)

    Number

  • Variable returns of the investor: dividends, fees, other interests and exposure to variability

    Text

    DIVIDENDS_VALUE_VARIABILITY_AND_PURCHASES_OF_OUTPUT

  • Annual fee of the decision maker (manager)

    Number

  • Assets under management used as the fee base

    Number

  • Annual management fee rate (%)

    Number

  • Non-controlling interests presented within equity

    Number

    400,000

  • Facts that occurred since the last assessment of control

    Text

  • Facts on the parent exemption: ownership, public market, filing with a regulator, higher parent that publishes

    Text

  • Facts on investment entity status: funds obtained, commitment, fair value measurement

    Text

2

Supporting documents

Evidence

  • Documents obtained and referenced (articles, shareholder agreements, management contracts, minutes, statements of the higher parent)

    EvidenceRequired

3

Analysis of control

Analysis

IFRS 10 §7IFRS 10 §8IFRS 10 §4IFRS 10 §B22IFRS 10 §B41IFRS 10 §B58IFRS 10

  • Points reviewed: the three elements of control

    ChecklistRequired

    • Relevant activities identified and the way they are directed
    • Existing rights that give the current ability to direct those activities
    • Substantive rights: practical ability to exercise them, no barrier
    • Protective rights set aside from the power analysis
    • Without a majority: size of the holding, dispersion of the others, past voting patterns, substantive potential rights
    • Variable returns and link between power and those returns
    • Decision maker: principal or agent (scope of authority, rights of others, remuneration, exposure)
    • Reassessment if facts and circumstances change one of the three elements of control
    • Parent exemption: four cumulative conditions checked
    • Follow-up: consolidation, non-controlling interests presented within equity, interaction with IFRS 3 and IAS 28
4

Calculations

Calculations

IFRS 10 §B41IFRS 10 §B22IFRS 10 §B58

  • Voting rights after exercising the potential rights (rights held + option rights, %)

    Calculation

    60 %

    Voting rights held by the investor (%) ; Additional voting rights obtained by exercising the option (%)

  • Weight in the votes cast (voting rights ÷ attendance × 100, %)

    Calculation

    Voting rights held by the investor (%) ; Average attendance at recent meetings (% of voting rights)

  • Annual remuneration of the decision maker (assets under management × fee rate)

    Calculation

    Assets under management used as the fee base ; Annual management fee rate (%)

5

Judgments: control, de facto control, agent, reassessment, exemption and investment entity

Judgment

IFRS 10 §7IFRS 10 §8IFRS 10 §4IFRS 10 §B22IFRS 10 §B41IFRS 10 §B58IFRS 10

  • Conclusion on control

    JudgmentRequired

    The investor controls the investee: power, variable returns and link all present

    The investor controls the investee: power, variable returns and link all present / The investor does not control the investee: one of the three elements is missing / Not applicable

    Professional judgment: control is supported by the facts; the standard sets no percentage of voting rights and the investor does not treat a protective right as a source of power.

  • Rationale: power, variable returns and link, element by element

    Text

    POWER_FROM_SUBSTANTIVE_VOTING_RIGHTS_VARIABLE_RETURNS_AND_LINK

  • Power without a majority of voting rights

    JudgmentRequired

    Not applicable

    Practical ability to direct the relevant activities alone despite a minority holding / Power not established: the situation is not clear enough to conclude on power / Not applicable

    Professional judgment: the standard sets no percentage threshold; a potential right counts only if it is substantive.

  • Rationale: relative size, dispersion of the others, past voting patterns, substantive potential rights

    Text

  • Principal or agent

    JudgmentRequired

    The decision maker acts for its own account: it may control the investee

    The decision maker acts for its own account: it may control the investee / The decision maker acts on behalf of other parties: it does not control the investee / Not applicable

    Professional judgment: no single factor is determinant alone and no exposure percentage is a rule of the standard.

  • Rationale: decision-making authority, removal rights of others, remuneration, exposure to variability

    Text

    MARVANE_ACTS_FOR_ITS_OWN_ACCOUNT

  • Reassessment of control

    JudgmentRequired

    No change in the three elements of control

    Facts changed and the reassessment changes the conclusion / Facts changed and the reassessment confirms the conclusion / No change in the three elements of control

  • Rationale: triggering fact, date and element of control affected

    Text

  • Parent exemption

    JudgmentRequired

    Not applicable

    The four conditions are met: consolidated statements not required / At least one condition is not met: consolidated statements required / Not applicable

  • Rationale: each of the four cumulative conditions

    Text

  • Investment entity status

    JudgmentRequired

    Not applicable

    The entity meets the definition: consolidation exception to be examined / The entity does not meet the definition: subsidiaries are consolidated / Not applicable

  • Rationale: funds, commitment, measurement of performance at fair value

    Text

6

Items to document for the information on control judgments

Disclosure

IFRS 10

  • Information to prepare for the note

    Checklist

    • Significant judgments made in concluding that control exists or does not
    • Non-controlling interests and unconsolidated structured entities
7

Conclusion

Conclusion

  • Supported conclusion on control, element by element, with the evidence and the points of judgment

    ConclusionRequired

8

Normative references

References

  • Normative references cited in this workpaper

    References

9

Checks and financial statement impact

  • Investee describedPass
  • Conclusion on control judgedPass
  • Voting rights after exercise recalculated = amount retainedNot evaluated
  • Weight in the votes cast recalculated = amount retained (judgment indicator, no threshold)Not evaluated
  • Decision maker remuneration recalculated = amount retainedNot evaluated
Assets
0
Liabilities
0
Profit or loss
0
OCI
0
Equity
0