In plain words
When a company controls another company, it presents both as one economic entity in consolidated financial statements. Control means power over the investee, exposure to variable returns, and the ability to use that power to affect those returns. The parent combines assets, liabilities, income and expenses line by line, eliminates intragroup transactions in full, and shows the share it does not own as non-controlling interest within equity.
Why it matters
If the entity controls one or more other entities (subsidiaries), IFRS 10 requires it to prepare consolidated financial statements that combine the parent and its subsidiaries as a single economic entity.
Diagnostic questions
Do you own shares or voting rights in other companies? Do you control any entity (power over its activities and exposure to its variable returns)? Do you prepare separate statements only, or a group consolidation?
Recognition
Control exists when the investor has power over the investee, exposure to variable returns, and the ability to use its power to affect those returns. Consolidate a subsidiary from the date control is obtained until it is lost.
Measurement
Combine like items of assets, liabilities, equity, income and expenses; eliminate intragroup balances and transactions in full; and present non-controlling interests within equity.
Presentation & disclosure
Disclose the basis for control, significant judgements and assumptions, non-controlling interests, and any significant restrictions on access to group assets.
Common mistakes
- Assuming control follows the ownership percentage only
- forgetting to eliminate intragroup transactions
- ignoring de facto control or potential voting rights.
Simple example
A parent owns 80% of a subsidiary. It consolidates 100% of the subsidiary's assets and liabilities and presents the 20% it does not own as a non-controlling interest within equity.
Professional judgment
Assessing control can require significant judgement, especially with less than a majority of voting rights or with structured entities.
Source basis
IFRS 10 · Consolidated Financial Statements
Paragraph references
Verified against the official standard texts used in the IFRS Expert skill.
Related issues
Educational and navigation content only. Not professional advice. Does not reproduce official IFRS/IAS text. Consult the authoritative standards and qualified professionals; professional judgment may still be required.