1 Groups and consolidation: an overview

2
Subsidiaries 
A 
subsidiary
is an entity 
controlled
by another entity.
Now you know what a group is in general terms and what consolidation means in principle, you are 
ready to learn some more formal definitions.
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PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
408
 
The relevant IFRSs for consolidation are: 

IAS 
27 
Separate financial statements

IAS 
28 
Investments in associates and joint ventures

IFRS 
3 
Business combinations

IFRS 10 
Consolidated financial statements
In this and the next two chapters we will consider the principles of IAS 27/IFRS 10 and IFRS 3. IAS 27 
was previously issued as IAS 27 
Consolidated and separate financial statements
. Effective from
1 January 2013, it was superseded by IAS 27 
Separate financial statements
. The consolidation 
requirements in the old IAS 27 are now contained in IFRS 10 
Consolidated financial statements
. IAS 28 
is considered in Section 3 below. First of all, however, we will look at all the important definitions, which 
determine how to treat each particular type of investment 
in consolidated financial statements. 
2.1 Definitions 
We will look at some of these definitions in more detail later, but they are useful here in that they give 
you an overview of all aspects of consolidation. 

'
Control
. An investor controls an investee when the investor 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.' 

'