I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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What about situations where this ownership criterion does not exist? The following situations show where 

control exists, even when the parent owns only 50% or less of the voting power of an entity. 

(a) 

The parent has power over more than 50% of the voting rights by virtue of agreement with other 

investors. 

(b) 

The parent has power to govern the financial and operating policies of the entity by statute or 

under an agreement. 

(c) 

The parent has the power to appoint or remove a majority of members of the board of directors (or 

equivalent governing body). 

(d) 

The parent has power to cast a majority of votes at meetings of the board of directors. 

 

2.3 Accounting treatment of subsidiaries in consolidated financial 

statements 

IFRS 10 requires a parent to present consolidated financial statements (also referred to as group 

accounts) in which the accounts of the parent and subsidiary (or subsidiaries) are combined and 

presented as a single entity (para. 19). This presentation means that the substance, rather than the 

legal form, of the relationship between parent and subsidiaries will be presented.  

Consolidated financial statements ignore the legal boundaries of the separate legal entities. But why are 

they considered necessary? They are important because the users of the parent's financial statements 

need to know about the financial position, results of operations and changes in financial position of the