ExpertEasy2 marksMultiple Choice
ACCA · Question 32 · Preparing simple consolidated financial statements
Under IFRS 10 Consolidated Financial Statements, which of the following is the primary criterion for determining whether a parent-subsidiary relationship exists?
Under IFRS 10 Consolidated Financial Statements, which of the following is the primary criterion for determining whether a parent-subsidiary relationship exists?
Answer options:
A.
Ownership of more than 50% of the equity shares
B.
Significant influence
C.
Control
D.
Joint control
How to approach this question
Recall the core principle of IFRS 10.
Full Answer
C.Control✓ Correct
IFRS 10 states that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Control is the sole basis for consolidation.
Common mistakes
Assuming 50% ownership is the absolute rule, ignoring de facto control.
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