IFRS 10- Consolidation requirements

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Xerxes
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Joined: 17 Dec 2021, 10:15

IFRS 10- Consolidation requirements

Post by Xerxes »

X(Mauritius) Ltd is an entity incorporated in Mauritius.

X(Zambia) Ltd is an entity incorporated in Zambia.

The shareholders of X(Mauritius) Ltd and X(Zambia) Ltd are the same persons ie,Mr Peter, Mr Andrew and Investment Holding Ltd and hold shares in both companies in the same proportion- .

--------- Director of X(Mauritius) Ltd Director of X(Zambia) Ltd
Mr Peter (shareholder) Yes Yes
Mr Andrew (shareholder) Yes Yes
Mr Henry Yes Yes
Mr John No Yes


(1) Mr Peter/Andrew/Henry represents 100% shareholding of both X(Mauritius) Ltd and X(Zambia) Ltd.
(2) Management team of X(Mauritius) Ltd and X(Zambia) Ltd is the same.
(3) X(Mauritius) Ltd has full control over the board of directors of X(Zambia) Ltd. X(Mauritius) Ltd subcontracts most of its activities to X(Zambia) Ltd.
(4) No direct shareholding of X(Mauritius) Ltd in X(Zambia) Ltd.

Question:
Is there a need to consolidate the financial statement of X(Zambia) Ltd into X(Mauritius) Ltd under IFRS10?

Thanks
Xerxes
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Marek Muc
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Re: IFRS 10- Consolidation requirements

Post by Marek Muc »

I don't think so. there seems to be no exposure, or rights, to variable returns

https://ifrscommunity.com/knowledge-bas ... le-returns
JRSB
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Re: IFRS 10- Consolidation requirements

Post by JRSB »

There was another poster from Africa who said that locally they consolidate if natural persons are the common controlling party, ie not with a parent company, in case relevant.
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Marek Muc
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Re: IFRS 10- Consolidation requirements

Post by Marek Muc »

good point, local law may impose requirements on the top of IFRS 10
Xerxes
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Joined: 17 Dec 2021, 10:15

Re: IFRS 10- Consolidation requirements

Post by Xerxes »

Thank you for your reply.

Just got back from holidays.

I have another question.

The directors of X (Mauritius) Ltd have absolute power over the running/management of X (Zambia) Ltd (the investee) and exposure or rights to variable return from their involvement. They have the ability to use their power to affect the return from its involvement with X (Zambia) Ltd (the investee).

Ques:

-Under these conditions, must X (Mauritius) Ltd consolidate X (Zambia) Ltd in its financial statements (as per IFRS 10)?

-If so, how is the set off of equity/investment carried out at the consolidation stage.
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Marek Muc
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Re: IFRS 10- Consolidation requirements

Post by Marek Muc »

if all conditions are met, you need to consolidate unless the exemption for investment entities applies:
https://ifrscommunity.com/knowledge-bas ... t-entities

if there is no interest in consolidated subsidiary, I suppose you would have non-controlling interest representing 100% interest in the subsidiary

PS.Have you read this section?:
https://ifrscommunity.com/knowledge-bas ... l-vs-agent
Xerxes
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Re: IFRS 10- Consolidation requirements

Post by Xerxes »

Thanks a lot.
This has clarified things.
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