C5 3 consolidating an unprofitable subsidiary

[IFRS ] An entity is required to consider all facts and circumstances when assessing whether it is an investment entity, including its purpose and design.

IFRS 10 provides that an investment entity should have the following typical characteristics [IFRS ]: The absence of any of these typical characteristics does not necessarily disqualify an entity from being classified as an investment entity.

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 ] However, an investment entity is still required to consolidate a subsidiary where that subsidiary provides services that relate to the investment entity’s investment activities.

[IFRS ] However, a parent need not present consolidated financial statements if it meets all of the following conditions: [IFRS 10:4(a)] Investment entities are prohibited from consolidating particular subsidiaries (see further information below).

[IFRS 10:1] The Standard: [IFRS 10:1] 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 * Added by Investment Entities amendments, effective 1 January 2014.

When the proportion of the equity held by non-controlling interests changes, the carrying amounts of the controlling and non-controlling interests area adjusted to reflect the changes in their relative interests in the subsidiary.

Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to the owners of the parent.[IFRS , IFRS 10: B96] If a parent loses control of a subsidiary, the parent [IFRS ]: If a parent loses control of a subsidiary that does not contain a business in a transaction with an associate or a joint venture gains or losses resulting from those transactions are recognised in the parent's profit or loss only to the extent of the unrelated investors' interests in that associate or joint venture.* * Added by amendments, effective 1 January 2016, however, the effective date of the amendment was later deferred indefinitely.

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IFRS 10 Consolidated Financial Statements outlines the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls.

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