ARE THERE NEW CONSOLIDATION REQUIREMENTS UNDER IFRS 10 ??

Some may be concerned that IFRS 10 introduces new concepts and consolidation requirements when compared to IAS 27 and SIC-12. On the contrary, IFRS 10 does not introduce new concepts. Instead, it builds on the control guidance that existed in IAS 27 and SIC-12 but adds additional context, explanation and application guidance that is consistent with the definition of control.
For example, IFRS 10 contains guidance regarding potential voting rights. Considering potential voting rights when assessing control is not new; IAS 27 already required that potential voting rights be considered if they were currently exercisable. However, this requirement was not always consistent with the defi nition of control in IAS 27. Potential voting rights were sometimes considered in the consolidation assessment when they did not actually affect a reporting entity’s control of an investee, and vice versa. IFRS 10 provides a more principles-based approach to the consideration of potential voting rights when assessing control, requiring that they are to be considered if they are substantive. IFRS 10 also contains additional application guidance regarding potential voting rights that is, again, consistent with the principle of control in IFRS 10.
Similarly, although the concept of control without a majority of voting rights was implicit in IAS 27, the standard did not provide explicit guidance or examples about that concept. As a result, inconsistent interpretations of that concept existed in practice. IFRS 10 clarifies that control can indeed exist without a majority of voting rights and provides factors to consider in making this assessment and examples of such circumstances. Finally, IAS 27 and SIC-12 implicitly required the continuous assessment of control. IFRS 10 now explicitly includes that requirement and provides application guidance describing situations in which a reporting entity would gain or lose control.
However, we do think that IFRS 10 will change the way in which a reporting entity will assess control of structured entities. IFRS 10 requires that a reporting entity will focus on all three elements of control when assessing control of any entity, including a structured entity, and should not focus only on risks and rewards, which sometimes was the case when applying SIC-12.