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Dear teachers,
I would like to ask when an entity is holding less than 50% of the Ordinary Share but it still can lead to the control existing because the following conditions:-
– The parent has the power more than the 50% of the OS from the virtue agreement with other investors
– The parent has the power to govern the financial and operating policies from the statute or agreement
– The parent has the power to remove and appoint the majority members of the BOD.
– The parent has the power to cash the majority of the vote at meeting of BOD.In this situation, the control existing and this is required to recognise as subsidiary right, so once recognised as Subsidiary we need to conso with this subsidiary also even the entity is holding less than 50% of ordinary share or we just recognised as subsidiary but we need not present conso statement?
Thank you very much.
Wish you all have a very nice day.
Regards,
ElizabethElizabeth, if it’s a subsidiary (no matter how we have arrived at that conclusion) then it’s a subsidiary! And that means that we need to include it within the consolidation.
Incidentally, if we control only (say) 28% of the voting power but no other single member (nor concert party of members) holds greater than an insignificant holding then, under IFRS10 we may have EFFECTIVE control and so must consolidate as though we held a majority of voting power!
Interesting times ahead!
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Dear teachers,
I’ve seen similar situation. Parent owns 43%, but has the control over Supervisory board and Board of directors. What confuses me is that this investment is disclosed in separate financial statements, as available for sale investment (not investment in subsidiary) and it is consolidated. I assume that the reason for this is that IAS 27 permits the valuation of subsidiaries at cost or in accordance with IAS 39.
I’m not sure whether the classification in separate financial statements is correct. Should it be disclosed as a subsidiary and explained that it is valued in accordance with IAS 39? Can an available for sale investment be consolidated at all? If yes, should the investment be eliminated in the consolidation or still be kept as available for sale investment?
The changes in the fair value have been presented in other comprehensive income.
What happened next is that the investment was sold,so there is a gain on disposal. This gain should be disclosed in the statement of changes in equity in case that the subsidiary was sold, but the sales of available for sale investment should be presented in P&L, is that right?
Thanks and regards.Following reclassification as Available for Sale at fair value as at that date, adjustments through OCI, the subsidiary should not be consolidated but should be shown as a separate class of asset – Available for Sale investment
Profit or loss on disposal of available for sale investment should be dealt with through profit or loss
Ok?
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