1 Groups and consolidation: an overview

 EXAM FOCUS POINT 
All the definitions relating to group accounts are extremely important. You must 
learn them 
and 
understand 
their meaning and application. The ACCA examining team has stated that students need to 
be able to identify the nature of an investment, using the definitions of control and significant influence. 
So questions in your exam may require you to apply these definitions to scenarios.
BPP Tutor Toolkit Copy

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CHAPTER 23
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INTRODUCTION TO CONSOLIDATED FINANCIAL STATEMENTS 
 
409 
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