Acca financial Accounting (FA) Study Text ac ca (FA)

2 

What is a group? 

A group exists where one entity, the 

parent

 (referred to as 

'the investor'

), has 

control over another entity, the 

subsidiary 

(referred to as 

'the investee'

), 

 

 

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Consolidated statement of financial position  

404

 

KAPLAN PUBLISHING

 

In accordance with IFRS 10 Consolidated Financial Statements specifies three 

criteria that must apply if one entity is to have control over another as follows: 

(i) 

power over the investee, which is normally exercised through the 

majority of voting rights (i.e. owning more than 50% of the equity 

shares),

 

(ii) 

exposure or rights to variable returns from involvement (e.g. a 

dividend), and

 

(iii) 

the ability to use power over the investee to affect the amount of 

investor returns. This is regarded as a crucial determinant in 

deciding whether or not control is exercised 

(IFRS 10, para 7).