Ifrs 10,11,3. Ias 27,28 All About Bus Combi

IFRS 10 Consolidated Financial Statements
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Overview
IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls. Control
requires exposure or rights to variable returns and the ability to affect those returns through power over an
investee.
IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January 2013.
History of IFRS 10
Date
Development
Comments
April 2002
Project on consolidation added to the

IASB's agenda (project history)
18 December 2008
ED 10 Consolidated Financial Statementspublished
29 September 2010
Staff draft of IFRS X Consolidated

Financial Statements published
12 May 2011
IFRS 10 Consolidated Financial Statements published
Effective for annual periods

beginning on or after 1
January 2013
28 June 2012
Amended by Consolidated Financial

Statements, Joint Arrangements and Disclosure of Interests in Other Entities:
Transition Guidance (project history)

January 2013
31 October 2012
Amended by Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
(project history)

January 2014
11 September 2014
Amended by Sale or Contribution of

Assets between an Investor and its
Associate or Joint Venture (Amendments
to IFRS 10 and IAS 28)

January 2016deferred indefinitely (see below)
18 December 2014
Amended by Investment Entities:

Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and
IAS 28)(project history)

January 2016
Comment deadline 20
March 2009
17 December 2015
Amended by Effective Date of Amendments to IFRS 10 and IAS 28
defer the effective date of

the September 2014 amendments to these standards indefinitely
Related Interpretations
o
IFRS 10 superseded SIC-12 Consolidation Special Purpose Entities
Amendments under consideration by the IASB

o
Common control transactions
IFRS 13 Unit of account
In addition, the IASB has signalled an intention to conduct a post-implementation review, commencing in
2016.
Publications and resources

o
IFRS in Focus Newsletter IASB issues new standard on consolidation summarising the requirements of IFRS 10 (PDF 82k, May 2011)
Deloitte IFRS Podcast (May 2011, 12 minutes, 8mb)
Effect analysis for IFRS 10 and IFRS 12 (link to IASB website)
Summary of IFRS 10
Objective
The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated
financial statements when an entity controls one or more other entities. [IFRS 10:1]
The Standard: [IFRS 10:1]
o
requires a parent entity (an entity that controls one or more other entities) to present consolidated financial statements
defines the principle of control, and establishes control as the basis for consolidation
set out how to apply the principle of control to identify whether an investor controls an
investee and therefore must consolidate the investee
sets out the accounting requirements for the preparation of consolidated financial statements
defines an investment entity and sets out an exception to consolidating particular subsidiaries
of an investment entity*.
* Added by Investment Entities amendments, effective 1 January 2014.
Key definitions
[IFRS 10:Appendix A]
Consolidated financial statements
The financial statements of a group in which the assets, liabilities, equity, income, expenses and
cash flows of the parent and its subsidiaries are presented as those of a single economic entity
Control of an investee
An investor controls an investee when the investor is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those returns through its power
over the investee
Investment entity*
An entity that:
a. obtains funds from one or more investors for the purpose of providing those investor(s)
with investment management services
b. commits to its investor(s) that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both, and
c. measures and evaluates the performance of substantially all of its investments on a fair
value basis.
Parent
An entity that controls one or more entities
Power
Existing rights that give the current ability to direct the relevant activities
Protective right
Rights designed to protect the interest of the party holding those rights without giving that party
power over the entity to which those rights relate
Relevant activit
Activities of the investee that significantly affect the investee's returns
* Added by Investment Entities amendments, effective 1 January 2014.
Control
An investor determines whether it is a parent by assessing whether it controls one or more investees. An
investor considers all relevant facts and circumstances when assessing whether it controls an investee. An
investor controls an investee when it is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the investee. [IFRS
10:5-6; IFRS 10:8]
An investor controls an investee if and only if the investor has all of the following elements: [IFRS 10:7]
power over the investee, i.e. the investor has existing rights that give it the ability to direct the
relevant activities (the activities that significantly affect the investee's returns)
exposure, or rights, to variable returns from its involvement with the investee
the ability to use its power over the investee to affect the amount of the investor's returns.
Power arises from rights. Such rights can be straightforward (e.g. through voting rights) or be complex
(e.g. embedded in contractual arrangements). An investor that holds only protective rights cannot have
power over an investee and so cannot control an investee [IFRS 10:11, IFRS 10:14].
An investor must be exposed, or have rights, to variable returns from its involvement with an investee to
control the investee. Such returns must have the potential to vary as a result of the investee's performance
and can be positive, negative, or both. [IFRS 10:15]
A parent must not only have power over an investee and exposure or rights to variable returns from its involvement with the investee, a parent must also have the ability to use its power over the investee to affect
its returns from its involvement with the investee. [IFRS 10:17].
When assessing whether an investor controls an investee an investor with decision-making rights determines whether it acts as principal or as an agent of other parties. A number of factors are considered in
making this assessment. For instance, the remuneration of the decision-maker is considered in determining whether it is an agent. [IFRS 10:B58, IFRS 10:B60]
Accounting requirements
Preparation of consolidated financial statements
A parent prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances. [IFRS 10:19]
However, a parent need not present consolidated financial statements if it meets all of the following conditions: [IFRS 10:4(a)]
o
it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its

other owners, including those not otherwise entitled to vote, have been informed about, and do
not object to, the parent not presenting consolidated financial statements
its debt or equity instruments are not traded in a public market (a domestic or foreign stock
exchange or an over-the-counter market, including local and regional markets)
it did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a
public market, and
its ultimate or any intermediate parent of the parent produces financial statements available for
public use that comply with IFRSs, in which subsidiaries are consolidated or are measured at
fair value through profit or loss in accordance with IFRS 10.*
* Fair value measurement clause added by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10,
IFRS 12 and IAS 28) amendments, effective 1 January 2016.
Investment entities are prohibited from consolidating particular subsidiaries (see further information
below).
Furthermore, post-employment benefit plans or other long-term employee benefit plans to
whichIAS 19 Employee Benefits applies are not required to apply the requirements of IFRS 10. [IFRS
10:4B]
Consolidation procedures
Consolidated financial statements: [IFRS 10:B86]
o
combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent
with those of its subsidiaries
offset (eliminate) the carrying amount of the parent's investment in each subsidiary and the
parent's portion of equity of each subsidiary (IFRS 3 Business Combinations explains how to
account for any related goodwill)
eliminate in full intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognised in assets, such as inventory and fixed assets, are eliminated in full).
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. Income and expenses of the subsidiary are based on the amounts of the assets and liabilities
recognised in the consolidated financial statements at the acquisition date. [IFRS 10:B88]
The parent and subsidiaries are required to have the same reporting dates, or consolidation based on additional financial information prepared by subsidiary, unless impracticable. Where impracticable, the most
recent financial statements of the subsidiary are used, adjusted for the effects of significant transactions or
events between the reporting dates of the subsidiary and consolidated financial statements. The difference
between the date of the subsidiary's financial statements and that of the consolidated financial statements
shall be no more than three months [IFRS 10:B92, IFRS 10:B93]
Non-controlling interests (NCIs)
A parent presents non-controlling interests in its consolidated statement of financial position within
equity, separately from the equity of the owners of the parent. [IFRS 10:22]
A reporting entity attributes the profit or loss and each component of other comprehensive income to the
owners of the parent and to the non-controlling interests. The proportion allocated to the parent and noncontrolling interests are determined on the basis of present ownership interests. [IFRS 10:B94, IFRS
10:B89]
The reporting entity also attributes total comprehensive income to the owners of the parent and to the
non-controlling interests even if this results in the non-controlling interests having a deficit balance.
[IFRS 10:B94]
Changes in ownership interests
Changes in a parent's ownership interest in a subsidiary that do not result in the parent losing control of
the subsidiary are equity transactions (i.e. transactions with owners in their capacity as owners). 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 10:23, IFRS 10:B96]
If a parent loses control of a subsidiary, the parent [IFRS 10:25]:
o
derecognises the assets and liabilities of the former subsidiary from the consolidated statement
of financial position
recognises any investment retained in the former subsidiary when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance
with relevant IFRSs. That retained interest is remeasured and the remeasured value is regarded
as the fair value on initial recognition of a financial asset in accordance with IFRS 9 Financial
Instruments or, when appropriate, the cost on initial recognition of an investment in an
associate or joint venture
recognises the gain or loss associated with the loss of control attributable to the former controlling interest.
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 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture amendments, effective 1 January 2016,
however, the effective date of the amendment was later deferred indefinitely.
Investment entities consolidation exemption

[Note: The investment entity consolidation exemption was introduced by Investment Entities, issued on 31 October 2012 and effective
for annual periods beginning on or after 1 January 2014.]
IFRS 10 contains special accounting requirements for investment entities. Where an entity meets the definition of an 'investment entity' (see above), it does not consolidate its subsidiaries, or
apply IFRS 3Business Combinations when it obtains control of another entity. [IFRS 10:31]
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 10:28]:
o
it has more than one investment
it has more than one investor
it has investors that are not related parties of the entity
it has ownership interests in the form of equity or similar interests.
The absence of any of these typical characteristics does not necessarily disqualify an entity from being
classified as an investment entity.
An investment entity is required to measure an investment in a subsidiary at fair value through profit or
loss in accordance with IFRS 9 Financial Instruments or IAS 39 Financial Instruments: Recognition and
Measurement. [IFRS 10:31]
However, an investment entity is still required to consolidate a subsidiary where that subsidiary provides
services that relate to the investment entitys investment activities. [IFRS 10:32]*
* Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) clarifies, effective 1 January
2016, that this relates to a subsidiary that is not itself an investment entity and whose main purpose and activities are providing services
that relate to the investment entity's investment activities.
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].
Special requirements apply where an entity becomes, or ceases to be, an investment entity.
[IFRS 10:B100-B101]
The exemption from consolidation only applies to the investment entity itself. Accordingly, a parent of an
investment entity is required to consolidate all entities that it controls, including those controlled through
an investment entity subsidiary, unless the parent itself is an investment entity. [IFRS 10:33]
Disclosure
There are no disclosures specified in IFRS 10. Instead, IFRS 12 Disclosure of Interests in Other
Entities outlines the disclosures required.
Applicability and early adoption
Note: This section has been updated to reflect the amendments to IFRS 10 made in June 2012 and October 2012.
IFRS 10 is applicable to annual reporting periods beginning on or after 1 January 2013 [IFRS 10:C1].
Retrospective application is generally required in accordance with IAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors [IFRS 10:C2]. However, an entity is not required to make adjustments
to the accounting for its involvement with entities that were previously consolidated and continue to be
consolidated, or entities that were previously unconsolidated and continue not to be consolidated at the
date of initial application of the IFRS [IFRS 10:C3].
Furthermore, an entity is not required to present the quantitative information required by paragraph 28(f)
of IAS 8 for the annual period immediately preceding the date of initial application of the standard (the
beginning of the annual reporting period for which IFRS 10 is first applied) [IFRS 10:C2A-C2B].
However, an entity may choose to present adjusted comparative information for earlier reporting periods,
any must clearly identify any unadjusted comparative information and explain the basis on which the
comparative information has been prepared [IFRS 10.C6A-C6B].
IFRS 10 prescribes modified accounting on its first application in the following circumstances:
o
an entity consolidates an entity not previously consolidated [IFRS 10:C4-C4C]
an entity no longer consolidates an entity that was previously consolidated [IFRS 10:C5-C5A]
in relation to certain amendments to IAS 27 made in 2008 that have been carried forward into
IFRS 10 [IFRS 10:C6].
An entity may apply IFRS 10 to an earlier accounting period, but if doing so it must disclose the fact that
is has early adopted the standard and also apply:
o
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IAS 27 Separate Financial Statements (as amended in 2011)
IAS 28 Investments in Associates and Joint Ventures (as amended in 2011).
The amendments made by Investment Entities are applicable to annual reporting periods beginning on or
after 1 January 2014 [IFRS 10:C1B]. At the date of initial application of the amendments, an entity
assesses whether it is an investment entity on the basis of the facts and circumstances that exist at that
date and additional transitional provisions apply [IFRS 10:C3BC3F].

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Overview
IFRS 11 Joint Arrangements outlines the accounting by entities that jointly control an arrangement. Joint control involves the contractually agreed sharing of control and arrangements
subject to joint control are classified as either a joint venture (representing a share of net assets
and equity accounted) or a joint operation (representing rights to assets and obligations for liabilities, accounted for accordingly).
IFRS 11 was issued in May 2011 and applies to annual reporting periods beginning on or after 1
January 2013.
History of IFRS 11
Date
Development
Comments
November 2004
Project on joint arrangements added to the

IASB's agenda
History of the project
13 September 2007
Exposure Draft ED 9 Joint Arrangementspublished
Comment deadline 11
January 2008
12 May 2011
IFRS 11 Joint Arrangements issued
Effective for annual

periods beginning on or
after 1 January 2013
28 June 2012
Amended by Consolidated Financial Statements, Joint Arrangements and Disclosure of

Interests in Other Entities: Transition
Guidance

6 May 2014
Amended by Accounting for Acquisitions of

Interests in Joint Operations (Amendments
to IFRS 11)

o
IFRS 11 superseded SIC-13 Jointly Controlled Entities - Non-Monetary Contributions

by Venturers

IFRS 3/IFRS 11 Remeasurement of previously held interests
The IASB has signalled an intention to conduct a post-implementation review of IFRS 11, commencing in 2016.
o
Publications and resources

o
IFRS in Focus Newsletter IASB issues new standard on joint arrangements summarising the requirements of IFRS 11 (PDF 69k, May 2011)
Deloitte IFRS Podcast (May 2011, 10 minutes, 7mb)
Effect analysis for IFRS 11 (link to IASB website)
Summary of IFRS 11
Core principle
The core principle of IFRS 11 is that a party to a joint arrangement determines the type of joint
arrangement in which it is involved by assessing its rights and obligations and accounts for
those rights and obligations in accordance with that type of joint arrangement. [IFRS 11:1-2]
Key definitions
[IFRS 11:Appendix A]
Joint arrangement
An arrangement of which two or more parties have joint control
Joint control
The contractually agreed sharing of control of an arrangement, which exists only when
decisions about the relevant activities require the unanimous consent of the parties
sharing control
Joint operation
A joint arrangement whereby the parties that have joint control of the arrangement have
rights to the assets, and obligations for the liabilities, relating to the arrangement
Joint
venture
A joint arrangement whereby the parties that have joint control of the arrangement have
rights to the net assets of the arrangement
A party to a joint venture that has joint control of that joint venture
An entity that participates in a joint arrangement, regardless of whether that entity has
joint control of the arrangement
A separately identifiable financial structure, including separate legal entities or entities

recognised by statute, regardless of whether those entities have a legal personality
Joint arrangements
A joint arrangement is an arrangement of which two or more parties have joint control.
[IFRS 11:4]
A joint arrangement has the following characteristics: [IFRS 11:5]
o
the parties are bound by a contractual arrangement, and
the contractual arrangement gives two or more of those parties joint control of the
arrangement.
A joint arrangement is either a joint operation or a joint venture. [IFRS 11:6]

Joint control
Joint venturer
Party to a joint
Separate vehic
Joint control is the contractually agreed sharing of control of an arrangement, which exists only
when decisions about the relevant activities require the unanimous consent of the parties
sharing control. [IFRS 11:7]
Before assessing whether an entity has joint control over an arrangement, an entity first
assesses whether the parties, or a group of the parties, control the arrangement (in accordance
with the definition of control in IFRS 10 Consolidated Financial Statements). [IFRS 11:B5]
After concluding that all the parties, or a group of the parties, control the arrangement collectively, an entity shall assess whether it has joint control of the arrangement. Joint control exists
only when decisions about the relevant activities require the unanimous consent of the parties
that collectively control the arrangement. [IFRS 11:B6]
The requirement for unanimous consent means that any party with joint control of the arrangement can prevent any of the other parties, or a group of the parties, from making unilateral
decisions (about the relevant activities) without its consent. [IFRS 11:B9]
Types of joint arrangements
Joint arrangements are either joint operations or joint ventures:
o
A joint operation is a joint arrangement whereby the parties that have joint control of
the arrangement have rights to the assets, and obligations for the liabilities, relating to
the arrangement. Those parties are called joint operators. [IFRS 11:15]
A joint venture is a joint arrangement whereby the parties that have joint control of
the arrangement have rights to the net assets of the arrangement. Those parties are
called joint venturers. [IFRS 11:16]

Classifying joint arrangements
The classification of a joint arrangement as a joint operation or a joint venture depends upon the
rights and obligations of the parties to the arrangement. An entity determines the type of joint
arrangement in which it is involved by considering the structure and form of the arrangement,
the terms agreed by the parties in the contractual arrangement and other facts and circumstances. [IFRS 11:6, IFRS 11:14, IFRS 11:17]
Regardless of the purpose, structure or form of the arrangement, the classification of joint
arrangements depends upon the parties' rights and obligations arising from the arrangement.
[IFRS 11:B14; IFRS 11:B15]
A joint arrangement in which the assets and liabilities relating to the arrangement are held in a
separate vehicle can be either a joint venture or a joint operation. [IFRS 11:B19]
A joint arrangement that is not structured through a separate vehicle is a joint operation. In such
cases, the contractual arrangement establishes the parties' rights to the assets, and obligations
for the liabilities, relating to the arrangement, and the parties' rights to the corresponding
revenues and obligations for the corresponding expenses. [IFRS 11:B16]
Financial statements of parties to a joint arrangement
Joint operations
A joint operator recognises in relation to its interest in a joint operation: [IFRS 11:20]
its assets, including its share of any assets held jointly;
its liabilities, including its share of any liabilities incurred jointly;
its revenue from the sale of its share of the output of the joint operation;
its share of the revenue from the sale of the output by the joint operation; and
its expenses, including its share of any expenses incurred jointly.
A joint operator accounts for the assets, liabilities, revenues and expenses relating to its involvement in a joint operation in accordance with the relevant IFRSs. [IFRS 11:21]
The acquirer of an interest in a joint operation in which the activity constitutes a business, as
defined inIFRS 3 Business Combinations, is required to apply all of the principles on business
combinations accounting in IFRS 3 and other IFRSs with the exception of those principles that
conflict with the guidance in IFRS 11. [IFRS 11:21A] These requirements apply both to the initial
acquisition of an interest in a joint operation, and the acquisition of an additional interest in a
joint operation (in the latter case, previously held interests are not remeasured). [IFRS 11:B33C]
Note: The requirements above were introduced by Accounting for Acquisitions of Interests in Joint Operations, which applies
to annual periods beginning on or after 1 January 2016 on a prospective basis to acquisitions of interests in joint operations
occurring from the beginning of the first period in which the amendments are applied.
A party that participates in, but does not have joint control of, a joint operation shall also account
for its interest in the arrangement in accordance with the above if that party has rights to the
assets, and obligations for the liabilities, relating to the joint operation. [IFRS 11:23]
Joint ventures
A joint venturer recognises its interest in a joint venture as an investment and shall account for
that investment using the equity method in accordance with IAS 28 Investments in Associates
and Joint Ventures unless the entity is exempted from applying the equity method as specified in
that standard. [IFRS 11:24]
A party that participates in, but does not have joint control of, a joint venture accounts for its
interest in the arrangement in accordance with IFRS 9 Financial Instruments unless it has significant influence over the joint venture, in which case it accounts for it in accordance with IAS
28 (as amended in 2011). [IFRS 11:25]
Separate Financial Statements
The accounting for joint arrangements in an entity's separate financial statements depends on
the involvement of the entity in that joint arrangement and the type of the joint arrangement:
o
If the entity is a joint operator or joint venturer it shall account for its interest in
o
a joint operation in accordance with paragraphs 20-22;
a joint venture in accordance with paragraph 10 of IAS 27 Separate

Financial Statements. [IFRS 11:26]
If the entity is a party that participates in, but does not have joint control of, a joint
arrangement shall account for its interest in:
a joint operation in accordance with paragraphs 23;
a joint venture in accordance with IFRS 9, unless the entity has significant
influence over the joint venture, in which case it shall apply paragraph 10
of IAS 27 (as amended in 2011). [IFRS 11:27]
Disclosure
There are no disclosures specified in IFRS 11. Instead, IFRS 12 Disclosure of Interests in Other
Entities outlines the disclosures required.
Note: This section has been updated to reflect the amendments to IFRS 11 made in June 2012.
IFRS 11 is applicable to annual reporting periods beginning on or after 1 January 2013.

[IFRS 11:Appendix C1]
When IFRS 11 is first applied, an entity need only present the quantitative information required
by paragraph 28(f) of IAS 8 for the annual period immediately preceding the first annual period
for which the standard is applied [IFRS 11:C1B]
Special transitional provisions are included for: [IFRS 11.Appendix C2-C13]
o
transition from proportionate consolidation to the equity method for joint ventures
transition from the equity method to accounting for assets and liabilities for joint operations
transition in an entity's separate financial statements for a joint operation previously

accounted for as an investment at cost.
In general terms, the special transitional adjustments are required to be applied at the beginning
of the immediately preceding period (rather than the the beginning of the earliest period
presented). However, an entity may choose to present adjusted comparative information for
earlier reporting periods, and must clearly identify any unadjusted comparative information and
explain the basis on which the comparative information has been prepared [IFRS 11.C12AC12B].
An entity may apply IFRS 11 to an earlier accounting period, but if doing so it must disclose the
fact that is has early adopted the standard and also apply: [IFRS 11.Appendix C1]
o
IAS 27 Separate Financial Statements (as amended in 2011)
IFRS 3 Business Combinations

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Overview
IFRS 3 Business Combinations outlines the accounting when an acquirer obtains control of a business
(e.g. an acquisition or merger). Such business combinations are accounted for using the 'acquisition
method', which generally requires assets acquired and liabilities assumed to be measured at their fair
values at the acquisition date.
A revised version of IFRS 3 was issued in January 2008 and applies to business combinations occurring
in an entity's first annual period beginning on or after 1 July 2009.
History of IFRS 3
Date
Development
Comments
July 2001
Project added to IASB agenda
History of the project
(carried over from the old IASC)
5 December 2
002
Exposure Draft ED 3 Business

Combinations and related
exposure drafts proposing
amendments to IAS 36 and IAS
38 published
Comment deadline 4
April 2003
31 March 2004
IFRS 3 Business Combinations(2004) and related

amended versions of IAS
36 and IAS 38 issued
Effective for business

combinations for which
the agreement date is
on or after 31 March
2004
(IFRS 3 supersedes IAS 22)
29 April 2004
Exposure Draft Combinations

by Contract Alone or Involving
Mutual Entities published
Comment deadline 31
July 2004
(These proposals were not finalised, but

instead considered as part of the June
2005 exposure draft)
30 June 2005
Exposure Draft Proposed

Amendments to IFRS
3 published
Comment deadline 28
October 2005
10 January 200
IFRS 3 Business Combina-
Applies to business
tions(2008) issued

the acquisition date is
on or after the
beginning of the first
annual reporting period
July 2009
6 May 2010
Amended by Annual Improvements to IFRSs 2010 (measurement of non-controlling

interests, replaced share-based
payment awards, transitional
arrangements for contingent
consideration)

after 1 July 2010
12 December
2013
Amended by Annual Improvements to IFRSs 20102012

Cycle (contingent consideration)
Applicable for business

the acquisition date is
on or after 1 July 2014
12 December
2013
Amended by Annual Improvements to IFRSs 20112013

Cycle (scope exception for joint
ventures)

after 1 July 2014
o
None

o
IFRS 3 Definition of a business
IFRS 3/IFRS 11 Remeasurement of previously held interests
Common control transactions
Summary of IFRS 3
Background
IFRS 3 (2008) seeks to enhance the relevance, reliability and comparability of information provided about
business combinations (e.g. acquisitions and mergers) and their effects. It sets out the principles on the
recognition and measurement of acquired assets and liabilities, the determination of goodwill and the
necessary disclosures.
IFRS 3 (2008) resulted from a joint project with the US Financial Accounting Standards Board (FASB)
and replaced IFRS 3 (2004). FASB issued a similar standard in December 2007 (SFAS 141(R)). The
revisions result in a high degree of convergence between IFRSs and US GAAP in the accounting for
business combinations, although some potentially significant differences remain.
Key definitions
[IFRS 3, Appendix A]
business combination
A transaction or other event in which an acquirer obtains control of one or
more businesses. Transactions sometimes referred to as 'true mergers' or
'mergers of equals' are also business combinations as that term is used in
[IFRS 3]
business
An integrated set of activities and assets that is capable of being conducted
and managed for the purpose of providing a return in the form of dividends,
lower costs or other economic benefits directly to investors or other owners,
members or participants
acquisition date
The date on which the acquirer obtains control of the acquiree
acquirer
The entity that obtains control of the acquiree
acquiree
The business or businesses that the acquirer obtains control of in a business
combination
Scope
IFRS 3 must be applied when accounting for business combinations, but does not apply to:
o
The formation of a joint venture* [IFRS 3.2(a)]
The acquisition of an asset or group of assets that is not a business,

although general guidance is provided on how such transactions should be
accounted for [IFRS 3.2(b)]
Combinations of entities or businesses under common control (the IASB has

a separate agenda project on common control transactions) [IFRS 3.2(c)]
Acquisitions by an investment entity of a subsidiary that is required to be

measured at fair value through profit or loss under IFRS 10 Consolidated
Financial Statements. [IFRS 3.2A]
* Annual Improvements to IFRSs 20112013 Cycle, effective for annual periods beginning on or after 1 July 2014, amends this scope
exclusion to clarify that is applies to the accounting for the formation of a joint arrangement in the financial statements of the joint
arrangement itself.
Determining whether a transaction is a business combination

IFRS 3 provides additional guidance on determining whether a transaction meets the definition of a
business combination, and so accounted for in accordance with its requirements. This guidance includes:
o
Business combinations can occur in various ways, such as by transferring

cash, incurring liabilities, issuing equity instruments (or any combination
thereof), or by not issuing consideration at all (i.e. by contract alone) [IFRS
3.B5]
Business combinations can be structured in various ways to satisfy legal,

taxation or other objectives, including one entity becoming a subsidiary of
another, the transfer of net assets from one entity to another or to a new
entity [IFRS 3.B6]
The business combination must involve the acquisition of a business, which

generally has three elements: [IFRS 3.B7]
o
Inputs an economic resource (e.g. non-current assets, intellectual

property) that creates outputs when one or more processes are
applied to it
Process a system, standard, protocol, convention or rule that

when applied to an input or inputs, creates outputs (e.g. strategic
management, operational processes, resource management)
Output the result of inputs and processes applied to those inputs.
Method of accounting for business combinations

Acquisition method
The acquisition method (called the 'purchase method' in the 2004 version of IFRS 3) is used for all
business combinations. [IFRS 3.4]
Steps in applying the acquisition method are: [IFRS 3.5]
1. Identification of the 'acquirer'
2. Determination of the 'acquisition date'
3. Recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest (NCI, formerly called minority
interest) in the acquiree
4. Recognition and measurement of goodwill or a gain from a bargain purchase
Identifying an acquirer
The guidance in IFRS 10 Consolidated Financial Statements is used to identify an acquirer in a business
combination, i.e. the entity that obtains 'control' of the acquiree. [IFRS 3.7]
If the guidance in IFRS 10 does not clearly indicate which of the combining entities is an acquirer, IFRS 3
provides additional guidance which is then considered:
o
The acquirer is usually the entity that transfers cash or other assets where
the business combination is effected in this manner [IFRS 3.B14]
The acquirer is usually, but not always, the entity issuing equity interests
where the transaction is effected in this manner, however the entity also
considers other pertinent facts and circumstances including: [IFRS 3.B15]
o
relative voting rights in the combined entity after the business

combination
the existence of any large minority interest if no other owner or

group of owners has a significant voting interest
the composition of the governing body and senior management of

the combined entity
the terms on which equity interests are exchanged
The acquirer is usually the entity with the largest relative size (assets,
revenues or profit) [IFRS 3.B16]
For business combinations involving multiple entities, consideration is given

to the entity initiating the combination, and the relative sizes of the
combining entities. [IFRS 3.B17]
Acquisition date
An acquirer considers all pertinent facts and circumstances when determining the acquisition date, i.e. the
date on which it obtains control of the acquiree. The acquisition date may be a date that is earlier or later
than the closing date. [IFRS 3.8-9]
IFRS 3 does not provide detailed guidance on the determination of the acquisition date and the date identified should reflect all relevant facts and circumstances. Considerations might include, among others, the date a public offer
becomes unconditional (with a controlling interest acquired), when the acquirer
can effect change in the board of directors of the acquiree, the date of acceptance of an unconditional offer, when the acquirer starts directing the
acquiree's operating and financing policies, or the date competition or other authorities provide necessarily clearances.
Acquired assets and liabilities

IFRS 3 establishes the following principles in relation to the recognition and measurement of items
arising in a business combination:
o
Recognition principle. Identifiable assets acquired, liabilities assumed,

and non-controlling interests in the acquiree, are recognised separately
from goodwill [IFRS 3.10]
Measurement principle. All assets acquired and liabilities assumed in a

business combination are measured at acquisition-date fair value. [IFRS
3.18]
Exceptions to the recognition and measurement principles
The following exceptions to the above principles apply:
Contingent liabilities the requirements of IAS 37 Provisions, Contingent Liabilities and Contingent Assets do not apply to the recognition of
contingent liabilities arising in a business combination [IFRS 3.22-23]
Income taxes the recognition and measurement of income taxes is

in accordance withIAS 12 Income Taxes [IFRS 3.24-25]
Employee benefits assets and liabilities arising from an acquiree's

employee benefits arrangements are recognised and measured in accordance with IAS 19 Employee Benefits(2011) [IFRS 2.26]
Indemnification assets - an acquirer recognises indemnification

assets at the same time and on the same basis as the indemnified item
[IFRS 3.27-28]
Reacquired rights the measurement of reacquired rights is by

reference to the remaining contractual term without renewals [IFRS
3.29]
Share-based payment transactions - these are measured by

reference to the method inIFRS 2 Share-based Payment
Assets held for sale IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations is applied in measuring acquired non-current
assets and disposal groups classified as held for sale at the acquisition
date.
In applying the principles, an acquirer classifies and designates assets acquired and liabilities assumed on
the basis of the contractual terms, economic conditions, operating and accounting policies and other
pertinent conditions existing at the acquisition date. For example, this might include the identification of
derivative financial instruments as hedging instruments, or the separation of embedded derivatives from
host contracts.[IFRS 3.15] However, exceptions are made for lease classification (between operating and
finance leases) and the classification of contracts as insurance contracts, which are classified on the basis
of conditions in place at the inception of the contract. [IFRS 3.17]
Acquired intangible assets must be recognised and measured at fair value in accordance with the principles if it is separable or arises from other contractual rights, irrespective of whether the acquiree had
recognised the asset prior to the business combination occurring. This is because there is always sufficient
information to reliably measure the fair value of these assets. [IAS 38.33-37] There is no 'reliable measurement' exception for such assets, as was present under IFRS 3 (2004).
Goodwill
Goodwill is measured as the difference between:
o
the aggregate of (i) the value of the consideration transferred (generally at

fair value), (ii) the amount of any non-controlling interest (NCI, see below),
and (iii) in a business combination achieved in stages (see below), the acquisition-date fair value of the acquirer's previously-held equity interest in
the acquiree, and
the net of the acquisition-date amounts of the identifiable assets acquired

and the liabilities assumed (measured in accordance with IFRS 3). [IFRS
3.32]
This can be written in simplified equation form as follows:
Goodw
ill
Consideration transferred
Amount of noncontrolling
interests
Fair value of
previous equity
interests
Net
assets
recognised
If the difference above is negative, the resulting gain is a bargain purchase in profit or loss, which may
arise in circumstances such as a forced seller acting under compulsion. [IFRS 3.34-35] However, before
any bargain purchase gain is recognised in profit or loss, the acquirer is required to undertake a review to
ensure the identification of assets and liabilities is complete, and that measurements appropriately reflect
consideration of all available information. [IFRS 3.36]
Choice in the measurement of non-controlling interests (NCI)
IFRS 3 allows an accounting policy choice, available on a transaction by transaction basis, to measure
non-controlling interests (NCI) either at: [IFRS 3.19]
fair value (sometimes called the full goodwill method), or
the NCI's proportionate share of net assets of the acquiree.
The choice in accounting policy applies only to present ownership interests in the acquiree that entitle
holders to a proportionate share of the entity's net assets in the event of a liquidation (e.g. outside holdings
of an acquiree's ordinary shares). Other components of non-controlling interests at must be measured at
acquisition date fair values or in accordance with other applicable IFRSs (e.g. share-based payment transactions accounted for under IFRS 2 Share-based Payment). [IFRS 3.19]
Example
P pays 800 to acquire an 80% interest in the ordinary shares of S. The aggregated fair value of 100%
of S's identifiable assets and liabilities (determined in accordance with the requirements of IFRS 3)
is 600, and the fair value of the non-controlling interest (the remaining 20% holding of ordinary
shares) is 185.
The measurement of the non-controlling interest, and its resultant impacts on the determination of
goodwill, under each option is illustrated below:
NCI based on
fair value
NCI based on
net assets
Consideration transferred
800
800
Non-controlling interest
185 (1)
120 (2)
985
920
(600)
(600)
385
320
Net assets
Goodwill
(1) The fair value of the 20% non-controlling interest in S will not necessarily be proportionate to the price paid by P for its 80%
interest, primarily due to any control premium or discount [IFRS 3.B45]
(2) Calculated as 20% of the fair value of the net assets of 600.
Business combination achieved in stages (step acquisitions)

Prior to control being obtained, an acquirer accounts for its investment in the equity interests of an
acquiree in accordance with the nature of the investment by applying the relevant standard, e.g.IAS 28 Investments in Associates and Joint Ventures (2011), IFRS 11 Joint Arrangements, IAS 39Financial Instruments: Recognition and Measurement or IFRS 9 Financial Instruments. As part of accounting for the
business combination, the acquirer remeasures any previously held interest at fair value and takes this
amount into account in the determination of goodwill as noted above [IFRS 3.32] Any resultant gain or
loss is recognised in profit or loss or other comprehensive income as appropriate. [IFRS 3.42]
The accounting treatment of an entity's pre-combination interest in an acquiree is consistent with the view
that the obtaining of control is a significant economic event that triggers a remeasurement. Consistent
with this view, all of the assets and liabilities of the acquiree are fully remeasured in accordance with the
requirements of IFRS 3 (generally at fair value). Accordingly, the determination of goodwill occurs only
at the acquisition date. This is different to the accounting for step acquisitions under IFRS 3(2004).
Measurement period
If the initial accounting for a business combination can be determined only provisionally by the end of the
first reporting period, the business combination is accounted for using provisional amounts. Adjustments
to provisional amounts, and the recognition of newly identified asset and liabilities, must be made within
the 'measurement period' where they reflect new information obtained about facts and circumstances that
were in existence at the acquisition date. [IFRS 3.45] The measurement period cannot exceed one year
from the acquisition date and no adjustments are permitted after one year except to correct an error in accordance with IAS 8. [IFRS 3.50]
Related transactions and subsequent accounting
General principles
In general:
transactions that are not part of what the acquirer and acquiree (or its
former owners) exchanged in the business combination are identified and
accounted for separately from business combination
the recognition and measurement of assets and liabilities arising in a

business combination after the initial accounting for the business combination is dealt with under other relevant standards, e.g. acquired inventory is
subsequently accounted under IAS 2 Inventories. [IFRS 3.54]
When determining whether a particular item is part of the exchange for the acquiree or whether it is
separate from the business combination, an acquirer considers the reason for the transaction, who initiated
the transaction and the timing of the transaction. [IFRS 3.B50]
Contingent consideration
Contingent consideration must be measured at fair value at the time of the business combination and is
taken into account in the determination of goodwill. If the amount of contingent consideration changes as
a result of a post-acquisition event (such as meeting an earnings target), accounting for the change in consideration depends on whether the additional consideration is classified as an equity instrument or an asset
or liability: [IFRS 3.58]
o
If the contingent consideration is classified as an equity instrument, the

original amount is not remeasured
If the additional consideration is classified as an asset or liability that is a

financial instrument, the contingent consideration is measured at fair value
and gains and losses are recognised in either profit or loss or other comprehensive income in accordance with IFRS 9 Financial Instruments orIAS
39 Financial Instruments: Recognition and Measurement
If the additional consideration is not within the scope of IFRS 9 (or IAS 39),
it is accounted for in accordance with IAS 37 Provisions, Contingent Liabilities and Contingent Assets or other IFRSs as appropriate.
Note: Annual Improvements to IFRSs 20102012 Cycle changes these requirements for business combinations for which the acquisition
date is on or after 1 July 2014. Under the amended requirements, contingent consideration that is classified as an asset or liability is
measured at fair value at each reporting date and changes in fair value are recognised in profit or loss, both for contingent consideration
that is within the scope of IFRS 9/IAS 39 or otherwise.
Where a change in the fair value of contingent consideration is the result of additional information about
facts and circumstances that existed at the acquisition date, these changes are accounted for as measurement period adjustments if they arise during the measurement period (see above). [IFRS 3.58]
Acquisition costs
Costs of issuing debt or equity instruments are accounted for under IAS 32 Financial Instruments: Presentation and IAS 39 Financial Instruments: Recognition and Measurement/IFRS 9 Financial Instruments. All other costs associated with an acquisition must be expensed, including reimbursements to the
acquiree for bearing some of the acquisition costs. Examples of costs to be expensed include finder's fees;
advisory, legal, accounting, valuation and other professional or consulting fees; and general administrative costs, including the costs of maintaining an internal acquisitions department. [IFRS 3.53]
Pre-existing relationships and reacquired rights
If the acquirer and acquiree were parties to a pre-existing relationship (for instance, the acquirer had
granted the acquiree a right to use its intellectual property), this must must be accounted for separately
from the business combination. In most cases, this will lead to the recognition of a gain or loss for the
amount of the consideration transferred to the vendor which effectively represents a 'settlement' of the
pre-existing relationship. The amount of the gain or loss is measured as follows:
o
for pre-existing non-contractual relationships (for example, a lawsuit): by

reference to fair value
for pre-existing contractual relationships: at the lesser of (a) the

favourable/unfavourable contract position and (b) any stated settlement
provisions in the contract available to the counterparty to whom the
contract is unfavourable. [IFRS 3.B51-53]
However, where the transaction effectively represents a reacquired right, an intangible asset is recognised
and measured on the basis of the remaining contractual term of the related contract excluding any
renewals. The asset is then subsequently amortised over the remaining contractual term, again excluding
any renewals. [IFRS 3.55]
Contingent liabilities
Until a contingent liability is settled, cancelled or expired, a contingent liability that was recognised in the
initial accounting for a business combination is measured at the higher of the amount the liability would
be recognised under IAS 37 Provisions, Contingent Liabilities and Contingent Assets, and the amount less
accumulated amortisation under IAS 18 Revenue. [IFRS 3.56]
Contingent payments to employees and shareholders
As part of a business combination, an acquirer may enter into arrangements with selling shareholders or
employees. In determining whether such arrangements are part of the business combination or accounted
for separately, the acquirer considers a number of factors, including whether the arrangement requires
continuing employment (and if so, its term), the level or remuneration compared to other employees,
whether payments to shareholder employees are incremental to non-employee shareholders, the relative
number of shares owns, linkages to valuation of the acquiree, how the consideration is calculated, and
other agreements and issues. [IFRS 3.B55]
Where share-based payment arrangements of the acquiree exist and are replaced, the value of such awards
must be apportioned between pre-combination and post-combination service and accounted for accordingly. [IFRS 3.B56-B62B]
Indemnification assets
Indemnification assets recognised at the acquisition date (under the exceptions to the general recognition
and measurement principles noted above) are subsequently measured on the same basis of the indemnified liability or asset, subject to contractual impacts and collectibility. Indemnification assets are only
derecognised when collected, sold or when rights to it are lost. [IFRS 3.57]
Other issues
In addition, IFRS 3 provides guidance on some specific aspects of business combinations including:
o
business combinations achieved without the transfer of consideration, e.g.

'dual listed' and 'stapled' arrangements [IFRS 3.43-44]
reverse acquisitions [IFRS 3.B19]
identifying intangible assets acquired [IFRS 3.B31-34]
Disclosure
Disclosure of information about current business combinations

An acquirer is required to disclose information that enables users of its financial statements to evaluate
the nature and financial effect of a business combination that occurs either during the current reporting
period or after the end of the period but before the financial statements are authorised for issue. [IFRS
3.59]
Among the disclosures required to meet the foregoing objective are the following: [IFRS 3.B64-B66]
o
name and a description of the acquiree
acquisition date
percentage of voting equity interests acquired
primary reasons for the business combination and a description of how the
acquirer obtained control of the acquiree
description of the factors that make up the goodwill recognised
qualitative description of the factors that make up the goodwill recognised,

such as expected synergies from combining operations, intangible assets
that do not qualify for separate recognition
acquisition-date fair value of the total consideration transferred and the acquisition-date fair value of each major class of consideration
details of contingent consideration arrangements and indemnification

assets
details of acquired receivables
the amounts recognised as of the acquisition date for each major class of
assets acquired and liabilities assumed
details of contingent liabilities recognised
total amount of goodwill that is expected to be deductible for tax purposes
details about any transactions that are recognised separately from the acquisition of assets and assumption of liabilities in the business combination
information about a bargain purchase
information about the measurement of non-controlling interests
details about a business combination achieved in stages
information about the acquiree's revenue and profit or loss
information about a business combination whose acquisition date is after

the end of the reporting period but before the financial statements are authorised for issue
Disclosure of information about adjustments of past business combinations

An acquirer is required to disclose information that enables users of its financial statements to evaluate
the financial effects of adjustments recognised in the current reporting period that relate to business combinations that occurred in the period or previous reporting periods. [IFRS 3.61]
Among the disclosures required to meet the foregoing objective are the following: [IFRS 3.B67]
o
details when the initial accounting for a business combination is incomplete

for particular assets, liabilities, non-controlling interests or items of consideration (and the amounts recognised in the financial statements for the
business combination thus have been determined only provisionally)
follow-up information on contingent consideration
follow-up information about contingent liabilities recognised in a business

combination
a reconciliation of the carrying amount of goodwill at the beginning and end

of the reporting period, with various details shown separately
the amount and an explanation of any gain or loss recognised in the current
reporting period that both:
o
relates to the identifiable assets acquired or liabilities assumed in a

business combination that was effected in the current or previous
reporting period, and
is of such a size, nature or incidence that disclosure is relevant to

understanding the combined entity's financial statements.
Deloitte guide to IFRS 3 and IAS 27
In July 2008, the Deloitte IFRS Global Office has published Business Combinations and
Changes in Ownership Interests: A Guide to the Revised IFRS 3 and IAS 27. This 164-page
guide deals mainly with accounting for business combinations under IFRS 3(2008). Where
appropriate, it deals with related requirements of IAS 27(2008) particularly as regards the
definition of control, accounting for non-controlling interests, and changes in ownership
interests. Other aspects of IAS 27 (such as the requirements to prepare consolidated financial
statements and detailed procedures for consolidation) are not addressed.
o
Click to download the new Guide to IFRS 3 and IAS 27 (PDF 647k).
Deloitte United States guide to accounting for business combinations
In December 2009, Deloitte United States published an updated edition of A Roadmap to

Accounting for Business Combinations and Related Topics (PDF 2,197k). This 285-page book
reflects the FASB Accounting Standards Codification and includes a 12-page appendix that
examines differences between US GAAP and IFRSs (IFRS 3 and IASs 27, 36, and 38) on this
topic.
Contents of the book:
o
Section 1 - Scope of ASC 805
Section 2 - Identifying the Acquirer
Section 3 - Recognizing and Measuring Assets Acquired and Liabilities Assumed - General
Section 4 - Recognizing and Measuring Assets Acquired and Liabilities Assumed (Other Than Intangible Assets and Goodwill)
Section 5 - Recognizing and Measuring Acquired Intangible Assets

and Goodwill
Section 6 - Recognizing and Measuring the Consideration Transferred in a Business Combination
Section 7 - Noncontrolling Interests
Section 8 - Income Tax Considerations
Section 9 - Push-Down Basis of Accounting
Section 10 - Subsequent Accounting for Intangible Assets (Other

Than Goodwill)
Section 11 - Subsequent Accounting for Goodwill
Section 12 - Financial Statement Presentation Requirements
Section 13 - Financial Statement Disclosure Requirements
Section 14 - Transition Requirements and Other Adoption Considerations
Overview of differences between IFRS 3 (2008) and IFRS 3 (2004)

The table below summarises some of key differences in accounting for business combinations under IFRS
3 (2008) and IFRS 3 (2004). The table is not exhaustive.
Area
Transaction costs
High-level overview of changes

o
acquisition costs such as advisers fees,

stamp duty and similar costs cannot be
included in the measurement of goodwill
Calculation of goodwill
pre-existing ownership interests are

measured fair valued at acquisition date
option to measure non-controlling

interests on the basis of fair value or net
assets (transaction by transaction)
Contingent consideration
(e.g. earn-outs)
fair value accounting at the acquisition

date
subsequent changes do not impact

goodwill but are accounted for separately
Transactions arising in
conjunction with business
combinations
new detailed guidance on the split

between compensation and consideration for replacement share-based
payment awards
settlement of pre-existing relationships
(contracts, legal cases, etc.) can result

in a gain/loss
o
unrecognised deferred taxes no longer

impact goodwill on subsequent measurement
Recognition and measurement
'reliable measurement' exclusion for intangible assets removed
new guidance on indemnification assets

and assets not expected to be used
Changes in ownership
interests
(see IFRS 10)
buying or selling minority interests in a

subsidiary only impacts equity
loss of control requires fair valuing of

retained holding and recycling of
reserves
IAS 27 Separate Financial Statements (2011)

Quick Article Links
Overview
IAS 27 Separate Financial Statements (as amended in 2011) outlines the accounting and disclosure requirements for 'separate financial statements', which are financial statements prepared
by a parent, or an investor in a joint venture or associate, where those investments are
accounted for either at cost or in accordance with IAS 39 Financial Instruments: Recognition
and Measurement or IFRS 9Financial Instruments. The standard also outlines the accounting
requirements for dividends and contains numerous disclosure requirements.
IAS 27 was reissued in May 2011 and applies to annual periods beginning on or after 1 January
2013, superseding IAS 27 Consolidated and Separate Financial Statements from that date.
History of IAS 27 (as amended in 2011)
Date
Development
Comments
September 19
87
Exposure Draft E30 Consolidated

Financial Statements and
Accounting for Investments in Subsidiaries
April 1989
IAS 27 Consolidated Financial Statements and Accounting for Investments in Subsidiaries issued
1994
IAS 27 reformatted
December 199
8
Amended by IAS 39 Financial Instruments: Recognition and Measurement
Effective 1 January
2001
18 December
2003
IAS 27 Consolidated and Separate

Financial Statements issued
Effective for
annual periods
beginning on or
after 1 January
2005
25 June 2005
Exposure Draft of Proposed Amendments to IFRS 3 and IAS 27
10 January 200
8
IAS 27 Consolidated and Separate

Financial Statements (2008) issued
Effective for
annual periods
beginning on or
after 1 July 2009
22 May 2008
Amended by Cost of a Subsidiary in

the Separate Financial Statements
of a Parent on First-time Adoption of
IFRSs
Effective for
annual periods
beginning on or
after 1 January
2009
22 May 2008
Amended by Annual Improvements

to IFRSs
(investments in subsidiaries held for
sale)
Effective for
annual periods
beginning on or
after 1 January
Effective 1 January
1990
2009
6 May 2010
Amended by Annual Improvements

to IFRSs 2010
(transitional requirements)
Effective for
annual periods
beginning on or
after 1 July 2010
12 May 2011
Reissued as IAS 27 Separate

Financial Statements (as amended in
2011). Consolidation requirements
previously forming part of IAS 27
(2008) have been revised and are
now contained in IFRS 10 Consolidated Financial Statements
Effective for
annual periods
beginning on or
after 1 January
2013
31 October
2012
Amended by Investment Entities

(Amendments to IFRS 10, IFRS 12
and IAS 27) (project history)
Effective for
annual periods
beginning on or
after 1 January
2014
12 August
2014
Amended by Equity Method in

Separate Financial Statements
(Amendments to IAS 27) (project
history)
Effective for
annual periods
beginning on or
after 1 January
2016, with earlier
application
permitted

o
IFRS 13 Unit of account
Research project Common control transactions
Summary of IAS 27 (as amended in 2011)

The summary below applies to IAS 27 Separate Financial Statements, issued in May 2011
and applying to annual reporting periods beginning on or after 1 January 2013. For
earlier reporting periods, refer to our summary of IAS 27 Consolidated and Separate
Financial Statements.
Objectives of IAS 27
IAS 27 has the objective of setting standards to be applied in accounting for investments in subsidiaries, jointly ventures, and associates when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements.
Key definitions
[IAS 27(2011).4]
Consolidated
financial
statements
Financial statements of a group in which the assets, liabilities,

equity, income, expenses and cash flows of the parent and its
subsidiaries are presented as those of a single economic entity
Separate
financial
statements
Financial statements presented by a parent (i.e. an investor

with control of a subsidiary), an investor with joint control of,
or significant influence over, an investee, in which the investments are accounted for at cost or in accordance with IFRS
9Financial Instruments
Preparation of separate financial statements

Requirement for separate financial statements
IAS 27 does not mandate which entities produce separate financial statements available for
public use. It applies when an entity prepares separate financial statements that comply with
International Financial Reporting Standards. [IAS 27(2011).3]
Financial statements in which the equity method is applied are not separate financial statements. Similarly, the financial statements of an entity that does not have a subsidiary, associate
or joint venturer's interest in a joint venture are not separate financial statements. [IAS
27(2011).7]
An investment entity that is required, throughout the current period and all comparative periods
presented, to apply the exception to consolidation for all of its subsidiaries in accordance with
ofIFRS 10 Consolidated Financial Statements presents separate financial statements as its only
financial statements. [IAS 27(2011).8A]
[Note: The investment entity consolidation exemption was introduced into IFRS 10 by Investment Entities, issued on 31
October 2012 and effective for annual periods beginning on or after 1 January 2014.]
Choice of accounting method

When an entity prepares separate financial statements, investments in subsidiaries, associates,
and jointly controlled entities are accounted for either: [IAS 27(2011).10]
o
at cost, or
in accordance with IFRS 9 Financial Instruments (or IAS 39 Financial Instruments:

Recognition and Measurement for entities that have not yet adopted IFRS 9), or
using the equity method as decribed in IAS 28 Investments in Associates and Joint
Ventures. [See the amendment information below.]
The entity applies the same accounting for each category of investments. Investments that are
accounted for at cost and classified as held for sale in accordance with IFRS 5 Non-current
Assets Held for Sale and Discontinued Operations are accounted for in accordance with that
IFRS. Investments carried at cost should be measured at the lower of their carrying amount and
fair value less costs to sell. The measurement of investments accounted for in accordance with
IFRS 9 is not changed in such circumstances.
If an entity elects, in accordance with IAS 28 (as amended in 2011), to measure its investments
in associates or joint ventures at fair value through profit or loss in accordance with IFRS 9, it
shall also account for those investments in the same way in its separate financial statements.
[IAS 27(2011).11]
Investment entities
If a parent investment entity is required, in accordance with IFRS 10, to measure its investment
in a subsidiary at fair value through profit or loss in accordance with IFRS 9 or IAS 39, it is
required to also account for its investment in a subsidiary in the same way in its separate
financial statements. [IAS 27(2011).11A]
When a parent ceases to be an investment entity, the entity can account for an investment in a
subsidiary at cost (based on fair value at the date of change or status) or in accordance with
IFRS 9. When an entity becomes an investment entity, it accounts for an investment in a subsidiary at fair value through profit or loss in accordance with IFRS 9. [IAS 27(2011).11B]
Recognition of dividends
An entity recognises a dividend from a subsidiary, joint venture or associate in profit or loss in its
separate financial statements when its right to receive the dividend in established. [IAS
27(2011).12]
(Accounting for dividends where the equity method is applied to investments in joint ventures
and associates is specified in IAS 28 Investments in Associates and Joint Ventures.)
Group reorganisations
Specified accounting applies in separate financial statements when a parent reorganises the
structure of its group by establishing a new entity as its parent in a manner satisfying the
following criteria: [IAS 27(2011).13]
o
the new parent obtains control of the original parent by issuing equity instruments in
exchange for existing equity instruments of the original parent
the assets and liabilities of the new group and the original group are the same immediately before and after the reorganisation, and
the owners of the original parent before the reorganisation have the same absolute
and relative interests in the net assets of the original group and the new group immediately before and after the reorganisation.
Where these criteria are met, and the new parent accounts for its investment in the original
parent at cost, the new parent measures the carrying amount of its share of the equity items
shown in the separate financial statements of the original parent at the date of the reorganisation. [IAS 27(2011).13]
The above requirements:
o
apply to the establishment of an intermediate parent within a group, as well as establishment of a new ultimate parent of a group [IAS 27(2011).BC24]
apply to an entity that is not a parent entity and establishes a parent in a manner that
satisfies the above criteria [IAS 27(2011).14]
apply only where the criteria above are satisfied and do not apply to other types of reorganisations or for common control transactions more broadly. [IAS 27(2011).BC27].
Disclosure
When a parent, in accordance with paragraph 4(a) of IFRS 10, elects not to prepare consolidated financial statements and instead prepares separate financial statements, it shall disclose
in those separate financial statements: [IAS 27(2011).16]
o
the fact that the financial statements are separate financial statements; that the
exemption from consolidation has been used; the name and principal place of
business (and country of incorporation if different) of the entity whose consolidated
financial statements that comply with IFRS have been produced for public use; and
the address where those consolidated financial statements are obtainable,
a list of significant investments in subsidiaries, jointly controlled entities, and associates, including the name, principal place of business (and country of incorporation if
different), proportion of ownership interest and, if different, proportion of voting rights,
and
a description of the method used to account for the foregoing investments.
When an investment entity that is a parent prepares separate financial statements as its only
financial statements, it shall disclose that fact. The investment entity shall also present the disclosures relating to investment entities required by IFRS 12. [IAS 27(2011).16A]
When a parent (other than a parent covered by the above circumstances) or an investor with
joint control of, or significant influence over, an investee prepares separate financial statements,
the parent or investor shall identify the financial statements prepared in accordance
with IFRS 10, IFRS 11 orIAS 28 (as amended in 2011) to which they relate. The parent or
investor shall also disclose in its separate financial statements: [IAS 27(2011).17]
o
the fact that the statements are separate financial statements and the reasons why
those statements are prepared if not required by law,
a list of significant investments in subsidiaries, jointly controlled entities, and associates, including the name, principal place of business (and country of incorporation if
different), proportion of ownership interest and, if different, proportion of voting rights,

and
o

IAS 27 (as amended in 2011) is applicable to annual reporting periods beginning on or after 1
January 2013. [IAS 27(2011).18]
An entity may apply IAS 27 (as amended in 2011) to an earlier accounting period, but if doing so
it must disclose the fact that is has early adopted the standard and also apply: [IAS 27(2011).18]
o
The amendments to IAS 27 (2011) made by Investment Entities are applicable to annual
reporting periods beginning on or after 1 January 2014 and special transitional provisions apply.
Equity Method in Separate Financial Statements (Amendments to IAS 27), issued in August
2014, amended paragraphs 47, 10, 11B and 12. An entity shall apply those amendments for
annual periods beginning on or after 1 January 2016 retrospectively in accordance with IAS
8 Accounting Policies, Changes in Accounting Estimates and Errors. Earlier application is
permitted. If an entity applies those amendments for an earlier period, it shall disclose that fact.
[IAS 27(2011).18A-18J].
IAS 27 Consolidated and Separate Financial Statements (2008)

Quick Article Links
Overview
IAS 27 Consolidated and Separate Financial Statements outlines when an entity must consolidate another entity, how to account for a change in ownership interest, how to prepare separate
financial statements, and related disclosures. Consolidation is based on the concept of 'control'
and changes in ownership interests while control is maintained are accounted for as transactions between owners as owners in equity.
IAS 27 was reissued in January 2008 and applies to annual periods beginning on or after 1 July
2009, and is superseded by IAS 27 Separate Financial Statements and IFRS 10 Consolidated
Financial Statements with effect from annual periods beginning on or after 1 January 2013.
History of IAS 27
September 19
87
Exposure Draft E30 Consolidated Financial Statements and

Accounting for Investments in Subsidiaries
April 1989
IAS 27 Consolidated Financial Statements and Accounting

for Investments in Subsidiaries
1 January 1990
Effective date of IAS 27 (1989)
1994
IAS 27 was reformatted
December 199
8
IAS 27 was amended by IAS 39 Financial Instruments:

Recognition and Measurement effective 1 January 2001
18 December
2003
Revised version of IAS 27 issued by the IASB
1 January 2005
Effective date of IAS 27 (2003)
25 June 2005
Exposure Draft of Proposed Amendments to IFRS 3 and IAS

27
10 January 200
8
Revised IAS 27 (2008) issued
22 May 2008
IAS 27 amended for Cost of a Subsidiary in the Separate

Financial Statements of a Parent on First-time Adoption of
IFRSs
22 May 2008
IAS 27 amended for Annual Improvements to IFRSs

2007 relating to measurement of investments held for sale
under IFRS 5 in separate financial statements
1 January 2009
Effective date of the two May 2008 amendments
1 July 2009
Effective date of IAS 27 (2008). Deloitte has published

a Special Edition of our IAS Plus Newsletter dealing with the
January 2008 revisions to IFRS 3 and IAS 27 (PDF 123k).
6 May 2010
IAS 27 amended for Annual Improvements to IFRSs 2010
1 July 2010
Effective date of May 2010 amendment to IAS 27
12 May 2011
IAS 27 (2008) is superseded by IAS 27 Separate

Financial Statements (2011) and IFRS 10 Consolidated Financial Statementseffective 1 January 2013
o
IFRIC 17 Distributions of Non-cash Assets to Owners
SIC-12 Consolidation Special Purpose Entities
IAS 27 (revised 2003) supersedes SIC-33 Consolidation and Equity Method

Potential Voting Rights and Allocation of Ownership Interest
Summary of IAS 27
Objectives of IAS 27
IAS 27 has the twin objectives of setting standards to be applied:
o
in the preparation and presentation of consolidated financial statements for a group of

entities under the control of a parent; and
in accounting for investments in subsidiaries, jointly controlled entities, and associates

when an entity elects, or is required by local regulations, to present separate (non-consolidated) financial statements.
Key definitions [IAS 27.4]

Consolidated financial statements: the financial statements of a group presented as those of
a single economic entity.
Subsidiary: an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent).
Parent: an entity that has one or more subsidiaries.

Control: the power to govern the financial and operating policies of an entity so as to obtain
benefits from its activities.
Identification of subsidiaries
Control is presumed when the parent acquires more than half of the voting rights of the entity.
Even when more than one half of the voting rights is not acquired, control may be evidenced by
power: [IAS 27.13]
o
over more than one half of the voting rights by virtue of an agreement with other
investors, or
to govern the financial and operating policies of the entity under a statute or an
agreement; or
to appoint or remove the majority of the members of the board of directors; or
to cast the majority of votes at a meeting of the board of directors.
SIC-12 provides other indicators of control (based on risks and rewards) for Special Purpose
Entities (SPEs). SPEs should be consolidated where the substance of the relationship indicates
that the SPE is controlled by the reporting entity. This may arise even where the activities of the
SPE are predetermined or where the majority of voting or equity are not held by the reporting
entity. [SIC-12]
Presentation of consolidated financial statements
A parent is required to present consolidated financial statements in which it consolidates its investments in subsidiaries [IAS 27.9] with the following exception:
A parent is not required to (but may) present consolidated financial statements if and only if all of
the following four conditions are met: [IAS 27.10]
1.
the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of

another entity and its other owners, including those not otherwise entitled to vote, have
been informed about, and do not object to, the parent not presenting consolidated
financial statements;
2.
the parent's debt or equity instruments are not traded in a public market;
3.
the parent did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class
of instruments in a public market; and
4.
the ultimate or any intermediate parent of the parent produces consolidated financial
statements available for public use that comply with International Financial Reporting
Standards.
The consolidated accounts should include all of the parent's subsidiaries, both domestic and
foreign: [IAS 27.12]
o
There is no exemption for a subsidiary whose business is of a different nature from the
parent's.
There is no exemption for a subsidiary that operates under severe long-term restrictions impairing the subsidiary's ability to transfer funds to the parent. Such an
exemption was included in earlier versions of IAS 27, but in revising IAS 27 in
December 2003 the IASB concluded that these restrictions, in themselves, do not
preclude control.
There is no exemption for a subsidiary that had previously been consolidated and that
is now being held for sale. However, a subsidiary that meets the IFRS 5 criteria as an
asset held for sale shall be accounted for under that Standard.
Special purpose entities (SPEs) should be consolidated where the substance of the relationship
indicates that the SPE is controlled by the reporting entity. This may arise even where the activities of the SPE are predetermined or where the majority of voting or equity are not held by the
reporting entity. [SIC-12]
Once an investment ceases to fall within the definition of a subsidiary, it should be accounted for
as an associate under IAS 28, as a joint venture under IAS 31, or as an investment under IAS
39, as appropriate. [IAS 27.31]
Consolidation procedures
Intragroup balances, transactions, income, and expenses should be eliminated in full. Intragroup
losses may indicate that an impairment loss on the related asset should be recognised. [IAS
27.24-25]
The financial statements of the parent and its subsidiaries used in preparing the consolidated
financial statements should all be prepared as of the same reporting date, unless it is impracticable to do so. [IAS 27.26] If it is impracticable a particular subsidiary to prepare its financial
statements as of the same date as its parent, adjustments must be made for the effects of significant transactions or events that occur between the dates of the subsidiary's and the parent's
financial statements. And in no case may the difference be more than three months. [IAS 27.27]
Consolidated financial statements must be prepared using uniform accounting policies for like
transactions and other events in similar circumstances. [IAS 27.28]
Minority interests should be presented in the consolidated balance sheet within equity, but
separate from the parent's shareholders' equity. Minority interests in the profit or loss of the
group should also be separately disclosed. [IAS 27.33]
Where losses applicable to the minority exceed the minority interest in the equity of the relevant
subsidiary, the excess, and any further losses attributable to the minority, are charged to the
group unless the minority has a binding obligation to, and is able to, make good the losses.
Where excess losses have been taken up by the group, if the subsidiary in question subsequently reports profits, all such profits are attributed to the group until the minority's share of
losses previously absorbed by the group has been recovered. [IAS 27.35]
Partial disposal of an investment in a subsidiary
The accounting depends on whether control is retained or lost:
o
Partial disposal of an investment in a subsidiary while control is retained. This is

accounted for as an equity transaction with owners, and gain or loss is not recognised.
Partial disposal of an investment in a subsidiary that results in loss of

control. Loss of control triggers remeasurement of the residual holding to fair value.
Any difference between fair value and carrying amount is a gain or loss on the
disposal, recognised in profit or loss. Thereafter, apply IAS 28, IAS 31, or IAS 39, as
appropriate, to the remaining holding.
Acquiring additional shares in the subsidiary after control is obtained

Acquiring additional shares in the subsidiary after control was obtained is accounted for as an
equity transaction with owners (like acquisition of 'treasury shares'). Goodwill is not remeasured.
Separate financial statements of the parent or investor in an associate or jointly

controlled entity
In the parent's/investor's individual financial statements, investments in subsidiaries, associates,
and jointly controlled entities should be accounted for either: [IAS 27.37]
o
at cost, or
in accordance with IAS 39.
The parent/investor shall apply the same accounting for each category of investments. Investments that are classified as held for sale in accordance with IFRS 5 shall be accounted for in accordance with that IFRS. [IAS 27.37] Investments carried at cost should be measured at the
lower of their carrying amount and fair value less costs to sell. The measurement of investments
accounted for in accordance with IAS 39 is not changed in such circumstances. [IAS 27.38] An
entity shall recognise a dividend from a subsidiary, jointly controlled entity or associate in profit
or loss in its separate financial statements when its right to receive the dividend is established.
[IAS 27.38A]
Disclosure
Disclosures required in consolidated financial statements: [IAS 27.40]
o
the nature of the relationship between the parent and a subsidiary when the parent
does not own, directly or indirectly through subsidiaries, more than half of the voting
power,
the reasons why the ownership, directly or indirectly through subsidiaries, of more than
half of the voting or potential voting power of an investee does not constitute control,
the reporting date of the financial statements of a subsidiary when such financial statements are used to prepare consolidated financial statements and are as of a reporting
date or for a period that is different from that of the parent, and the reason for using a
different reporting date or period, and
the nature and extent of any significant restrictions on the ability of subsidiaries to
transfer funds to the parent in the form of cash dividends or to repay loans or
advances.
Disclosures required in separate financial statements that are prepared for a parent that is
permitted not to prepare consolidated financial statements: [IAS 27.41]
the fact that the financial statements are separate financial statements; that the
exemption from consolidation has been used; the name and country of incorporation
or residence of the entity whose consolidated financial statements that comply with
IFRS have been produced for public use; and the address where those consolidated
financial statements are obtainable,
a list of significant investments in subsidiaries, jointly controlled entities, and associates, including the name, country of incorporation or residence, proportion of
ownership interest and, if different, proportion of voting power held, and
Disclosures required in the separate financial statements of a parent, investor in a jointly

controlled entity, or investor in an associate: [IAS 27.42]
o
the fact that the statements are separate financial statements and the reasons why
those statements are prepared if not required by law,
a list of significant investments in subsidiaries, jointly controlled entities, and associates, including the name, country of incorporation or residence, proportion of
ownership interest and, if different, proportion of voting power held, and
IAS 28 Investments in Associates (2003)

Quick Article Links
Overview
IAS 28 Investments in Associates outlines the accounting for investments in associates. An associate is an
entity over which an investor has significant influence, being the power to participate in the financial and
operating policy decisions of the investee (but not control or joint control), and investments in associates
are, with limited exceptions, required to be accounted for using the equity method.
IAS 28 was reissued in December 2003, applies to annual periods beginning on or after 1 January 2005,
and is superseded by IAS 28 Investments in Associates and Joint Ventures and IFRS 12 Disclosure of
Interests in Other Entities with effect from annual periods beginning on or after 1 January 2013.
History of IAS 28
Date
Development
Comments
July 1986
Exposure Draft E28 Accounting

for Investments in Associates
and Joint Ventures
April 1989
IAS 28 Accounting for Investments in Associates issued
1994
IAS 28 was reformatted
December 199
8
Amended by IAS 39 Financial

Instruments: Recognition and
Measurement
Effective 1 January 2001
18 December
2003
IAS 28 Investments in Associatesissued

10 January 200
8
Amended by IFRS 3 Business

Combinations (loss of significant influence)

after 1 July 2009
22 May 2008
Amended by Improvements to
IFRSs(impairment testing)

12 May 2011
Superseded by IAS 28 Investments in Associates

and Joint Ventures(2011)

Effective 1 January 1990
o
IAS 28 (2003) superseded SIC-3 Elimination of Unrealised Profits and

Losses on Transactions with Associates
IAS 28 (2003) superseded SIC-20 Equity Accounting Method Recognition

of Losses
IAS 28 (2003) superseded SIC-33 Consolidation and Equity Method

Potential Voting Rights and Allocation of Ownership Interest

o
None
Summary of IAS 28
Scope
IAS 28 applies to all investments in which an investor has significant influence but not control or joint
control except for investments held by a venture capital organisation, mutual fund, unit trust, and similar
entity that are designated under IAS 39 to be at fair value with fair value changes recognised in profit or
loss. [IAS 28.1]
Key definitions [IAS 28.2]
Associate: an entity in which an investor has significant influence but not control or joint control.
Significant influence: power to participate in the financial and operating policy decisions but not control
them.
Equity method: a method of accounting by which an equity investment is initially recorded at cost and
subsequently adjusted to reflect the investor's share of the net assets of the associate (investee).
Identification of associates
A holding of 20% or more of the voting power (directly or through subsidiaries) will indicate significant
influence unless it can be clearly demonstrated otherwise. If the holding is less than 20%, the investor will
be presumed not to have significant influence unless such influence can be clearly demonstrated. [IAS
28.6]
The existence of significant influence by an investor is usually evidenced in one or more of the following
ways: [IAS 28.7]
o
representation on the board of directors or equivalent governing body of

the investee
participation in the policy-making process
material transactions between the investor and the investee
interchange of managerial personnel
provision of essential technical information
Potential voting rights are a factor to be considered in deciding whether significant influence exists. [IAS
28.9]
Accounting for associates
In its consolidated financial statements, an investor should use the equity method of accounting for investments in associates, other than in the following three exceptional circumstances:
o
An investment in an associate held by a venture capital organisation or a

mutual fund (or similar entity) and that upon initial recognition is designated as held for trading under IAS 39. Under IAS 39, those investments are
measured at fair value with fair value changes recognised in profit or loss.
[IAS 28.1]
An investment classified as held for sale in accordance with IFRS 5. [IAS

28.13(a)]
A parent that is exempted from preparing consolidated financial statements

by paragraph 10 of IAS 27 may prepare separate financial statements as its
primary financial statements. In those separate statements, the investment
in the associate may be accounted for by the cost method or under IAS 39.
[IAS 28.13(b)]
An investor need not use the equity method if all of the following four conditions are met: [IAS 28.13(c)]
1. the investor is itself a wholly-owned subsidiary, or is a partiallyowned subsidiary of another entity and its other owners, including
those not otherwise entitled to vote, have been informed about, and
do not object to, the investor not applying the equity method;
2. the investor's debt or equity instruments are not traded in a public
market;
3. the investor did not file, nor is it in the process of filing, its financial
statements with a securities commission or other regulatory
organisation for the purpose of issuing any class of instruments in a
public market; and
4. the ultimate or any intermediate parent of the investor produces

consolidated financial statements available for public use that
comply with International Financial Reporting Standards.
Applying the equity method of accounting
Basic principle. Under the equity method of accounting, an equity investment is initially recorded at cost
and is subsequently adjusted to reflect the investor's share of the net profit or loss of the associate. [IAS
28.11]
Distributions and other adjustments to carrying amount. Distributions received from the investee
reduce the carrying amount of the investment. Adjustments to the carrying amount may also be required
arising from changes in the investee's other comprehensive income that have not been included in profit
or loss (for example, revaluations). [IAS 28.11]
Potential voting rights. Although potential voting rights are considered in deciding whether significant
influence exists, the investor's share of profit or loss of the investee and of changes in the investee's equity
is determined on the basis of present ownership interests. It should not reflect the possible exercise or
conversion of potential voting rights. [IAS 28.12]
Implicit goodwill and fair value adjustments. On acquisition of the investment in an associate, any difference (whether positive or negative) between the cost of acquisition and the investor's share of the fair
values of the net identifiable assets of the associate is accounted for like goodwill in accordance
with IFRS 3 Business Combinations. Appropriate adjustments to the investor's share of the profits or
losses after acquisition are made to account for additional depreciation or amortisation of the associate's
depreciable or amortisable assets based on the excess of their fair values over their carrying amounts at
the time the investment was acquired. [IAS 28.23]
Impairment. The impairment indicators in IAS 39 Financial Instruments: Recognition and Measurement, apply to investments in associates. [IAS 28.31] If impairment is indicated, the amount is calculated
by reference to IAS 36 Impairment of Assets. The entire carrying amount of the investment is tested for
impairment as a single asset, that is, goodwill is not tested separately. [IAS 28.33] The recoverable
amount of an investment in an associate is assessed for each individual associate, unless the associate
does not generate cash flows independently. [IAS 28.34]
Discontinuing the equity method. Use of the equity method should cease from the date that significant
influence ceases. The carrying amount of the investment at that date should be regarded as a new cost
basis. [IAS 28.18-19]
Transactions with associates. If an associate is accounted for using the equity method, unrealised profits
and losses resulting from upstream (associate to investor) and downstream (investor to associate) transactions should be eliminated to the extent of the investor's interest in the associate. However, unrealised
losses should not be eliminated to the extent that the transaction provides evidence of an impairment of
the asset transferred. [IAS 28.22]
Date of associate's financial statements. In applying the equity method, the investor should use the
financial statements of the associate as of the same date as the financial statements of the investor unless
it is impracticable to do so. [IAS 28.24] If it is impracticable, the most recent available financial statements of the associate should be used, with adjustments made for the effects of any significant transactions or events occurring between the accounting period ends. However, the difference between the
reporting date of the associate and that of the investor cannot be longer than three months. [IAS 28.25]
Associate's accounting policies. If the associate uses accounting policies that differ from those of the
investor, the associate's financial statements should be adjusted to reflect the investor's accounting
policies for the purpose of applying the equity method. [IAS 28.27]
Losses in excess of investment. If an investor's share of losses of an associate equals or exceeds its
"interest in the associate", the investor discontinues recognising its share of further losses. The "interest in
an associate" is the carrying amount of the investment in the associate under the equity method together
with any long-term interests that, in substance, form part of the investor's net investment in the associate.
[IAS 28.29] After the investor's interest is reduced to zero, additional losses are recognised by a provision
(liability) only to the extent that the investor has incurred legal or constructive obligations or made
payments on behalf of the associate. If the associate subsequently reports profits, the investor resumes
recognising its share of those profits only after its share of the profits equals the share of losses not recognised. [IAS 28.30]
Partial disposals of associates. If an investor loses significant influence over an associate, it derecognises that associate and recognises in profit or loss the difference between the sum of the proceeds
received and any retained interest, and the carrying amount of the investment in the associate at the date
significant influence is lost.
Separate financial statements of the investor
Equity accounting is required in the separate financial statements of the investor even if consolidated
accounts are not required, for example, because the investor has no subsidiaries. But equity accounting is
not required where the investor would be exempt from preparing consolidated financial statements under
IAS 27. In that circumstance, instead of equity accounting, the parent would account for the investment
either (a) at cost or (b) in accordance with IAS 39.
Disclosure
The following disclosures are required: [IAS 28.37]
o
fair value of investments in associates for which there are published price
quotations
summarised financial information of associates, including the aggregated

amounts of assets, liabilities, revenues, and profit or loss
explanations when investments of less than 20% are accounted for by the
equity method or when investments of more than 20% are not accounted
for by the equity method
use of a reporting date of the financial statements of an associate that is

different from that of the investor
nature and extent of any significant restrictions on the ability of associates

to transfer funds to the investor in the form of cash dividends, or
repayment of loans or advances
unrecognised share of losses of an associate, both for the period and cumulatively, if an investor has discontinued recognition of its share of losses of
an associate
explanation of any associate is not accounted for using the equity method
summarised financial information of associates, either individually or in

groups, that are not accounted for using the equity method, including the
amounts of total assets, total liabilities, revenues, and profit or loss
The following disclosures relating to contingent liabilities are also required: [IAS 28.40]
o
investor's share of the contingent liabilities of an associate incurred jointly

with other investors
contingent liabilities that arise because the investor is severally liable for all
or part of the liabilities of the associate
Venture capital organisations, mutual funds, and other similar entities must provide disclosures about
nature and extent of any significant restrictions on transfer of funds by associates. [IAS 28.1]
Presentation
o
Equity method investments must be classified as non-current assets. [IAS

28.38]
The investor's share of the profit or loss of equity method investments, and
the carrying amount of those investments, must be separately disclosed.
[IAS 28.38]
The investor's share of any discontinuing operations of such associates is

also separately disclosed. [IAS 28.38]
The investor's share of changes recognised directly in the associate's other

comprehensive income are also recognised in other comprehensive income
by the investor, with disclosure in the statement of changes in equity as
required by IAS 1 Presentation of Financial Statements. [IAS 28.39]

Ifrs 10,11,3. Ias 27,28 All About Bus Combi

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IFRS 10 Consolidated Financial Statements

Quick Article Links

Project on consolidation added to the

ED 10 Consolidated Financial Statementspublished

Staff draft of IFRS X Consolidated

IFRS 10 Consolidated Financial Statements published

Effective for annual periods

Amended by Consolidated Financial

Effective for annual periods

Effective for annual periods

Amended by Sale or Contribution of

Effective for annual periods

Amended by Investment Entities:

Effective for annual periods

Amended by Effective Date of Amendments to IFRS 10 and IAS 28

defer the effective date of

IFRS 10 superseded SIC-12 Consolidation Special Purpose Entities

Amendments under consideration by the IASB

Common control transactions

IFRS 13 Unit of account

Publications and resources

Deloitte IFRS Podcast (May 2011, 12 minutes, 8mb)

Effect analysis for IFRS 10 and IFRS 12 (link to IASB website)

* Added by Investment Entities amendments, effective 1 January 2014.

it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and its

Investment entities consolidation exemption

it has more than one investment

it has more than one investor

it has investors that are not related parties of the entity

it has ownership interests in the form of equity or similar interests.

an entity consolidates an entity not previously consolidated [IFRS 10:C4-C4C]

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IAS 27 Separate Financial Statements (as amended in 2011)

IAS 28 Investments in Associates and Joint Ventures (as amended in 2011).

IFRS 11 Joint Arrangements

Project on joint arrangements added to the

History of the project

Exposure Draft ED 9 Joint Arrangementspublished

IFRS 11 Joint Arrangements issued

Effective for annual

Amended by Consolidated Financial Statements, Joint Arrangements and Disclosure of

Effective for annual

Amended by Accounting for Acquisitions of

Effective for annual

IFRS 11 superseded SIC-13 Jointly Controlled Entities - Non-Monetary Contributions

Amendments under consideration by the IASB

Publications and resources

Deloitte IFRS Podcast (May 2011, 10 minutes, 7mb)

Effect analysis for IFRS 11 (link to IASB website)

A separately identifiable financial structure, including separate legal entities or entities

the parties are bound by a contractual arrangement, and

A joint arrangement is either a joint operation or a joint venture. [IFRS 11:6]

called joint venturers. [IFRS 11:16]

its assets, including its share of any assets held jointly;

its liabilities, including its share of any liabilities incurred jointly;

its expenses, including its share of any expenses incurred jointly.

a joint operation in accordance with paragraphs 20-22;

a joint venture in accordance with paragraph 10 of IAS 27 Separate

a joint operation in accordance with paragraphs 23;

IFRS 11 is applicable to annual reporting periods beginning on or after 1 January 2013.

transition in an entity's separate financial statements for a joint operation previously