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

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. 

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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.' 

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Power

. Existing rights that give the current ability to direct the relevant activities.' 

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Subsidiary

. An entity that is controlled by another entity (known as the parent).' 

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Parent

. An entity that controls one or more entities.' 

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Group

. A parent and all its subsidiaries.' 

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