C5 3 consolidating an unprofitable subsidiary
[IFRS ] An entity is required to consider all facts and circumstances when assessing whether it is an investment entity, including its purpose and design.
IFRS 10 provides that an investment entity should have the following typical characteristics [IFRS ]: The absence of any of these typical characteristics does not necessarily disqualify an entity from being classified as an investment entity.
Because an investment entity is not required to consolidate its subsidiaries, intragroup related party transactions and outstanding balances are not eliminated [IAS 24.4, IAS 39.80].For instance, the remuneration of the decision-maker is considered in determining whether it is an agent.[IFRS 10: B58, IFRS 10: B60] Preparation of consolidated financial statements A parent prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.When the proportion of the equity held by non-controlling interests changes, the carrying amounts of the controlling and non-controlling interests area adjusted to reflect the changes in their relative interests in the subsidiary.
Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.[IFRS , IFRS 10: B96] If a parent loses control of a subsidiary, the parent [IFRS ]: If a parent loses control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture gains or losses resulting from those transactions are recognised in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture.* * Added by amendments, effective 1 January 2016, however, the effective date of the amendment was later deferred indefinitely.
[IFRS 10:4B] Consolidation procedures Consolidated financial statements: [IFRS 10: B86] A reporting entity includes the income and expenses of a subsidiary in the consolidated financial statements from the date it gains control until the date when the reporting entity ceases to control the subsidiary.