In determining control under IFRS 10, which elements are considered?

In determining control under IFRS 10, which elements are considered?

• A. Power over the investee, exposure to variable returns, and the ability to use power to affect returns.
• B. Percentage ownership alone.
• C. Access to annual reports.
• D. The absence of related-party transactions.

Answer: (D)

Control under IFRS 10 rests on a three-part test: having power over the investee, being exposed to variable returns, and the ability to use that power to affect the returns. The power is the practical ability to direct the relevant activities of the investee, not just ownership. The returns are the rewards (or risks) tied to the investee’s performance, and the investor must be able to influence those returns by exercising the power. Only when all three elements are present does consolidation apply. Merely owning a large stake, having access to annual reports, or the absence of related-party transactions do not establish control by themselves.

Control under IFRS 10 rests on a three-part test: having power over the investee, being exposed to variable returns, and the ability to use that power to affect the returns. The power is the practical ability to direct the relevant activities of the investee, not just ownership. The returns are the rewards (or risks) tied to the investee’s performance, and the investor must be able to influence those returns by exercising the power. Only when all three elements are present does consolidation apply. Merely owning a large stake, having access to annual reports, or the absence of related-party transactions do not establish control by themselves.