According to AASB 10 Consolidated Financial Statements, which of the following factors indicate the existence of control?I. Possessing existing rights that give the current ability to direct the relevant activities.II. Shared power in the governance of financial and operating policies of another entity so as to obtain benefits.III. The power to have significant influence over the operating policies of an entity so as to obtain benefits.IV. Ownership of more than 50% of the voting rights in the subsidiary.Group of answer choices
Question
According to AASB 10 Consolidated Financial Statements, which of the following factors indicate the existence of control?I. Possessing existing rights that give the current ability to direct the relevant activities.II. Shared power in the governance of financial and operating policies of another entity so as to obtain benefits.III. The power to have significant influence over the operating policies of an entity so as to obtain benefits.IV. Ownership of more than 50% of the voting rights in the subsidiary.Group of answer choices
Solution
According to AASB 10 Consolidated Financial Statements, the factors that indicate the existence of control are:
I. Possessing existing rights that give the current ability to direct the relevant activities. IV. Ownership of more than 50% of the voting rights in the subsidiary.
Here are the steps to understand this:
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AASB 10 Consolidated Financial Statements: This is a standard that sets out the requirements for the preparation and presentation of consolidated financial statements, requiring entities to consolidate entities it controls.
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Control: According to AASB 10, 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.
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Existing Rights: The investor must have existing rights that give it the current ability to direct the relevant activities, i.e., the activities that significantly affect the investee’s returns.
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Ownership of Voting Rights: Control is usually evidenced by owning more than 50% of the voting rights in the subsidiary.
The options II and III, which mention shared power and significant influence, do not necessarily indicate control as per AASB 10. Shared power might not give the ability to direct the relevant activities, and significant influence (usually associated with ownership of 20-50% of voting rights) is less than control.
Similar Questions
According to AASB 10/IFRS 10 Consolidated Financial Statements, which of the following factors indicate the existence of control?
Which of the following is not one of the three elements of control according to AASB 10 Consolidated Financial Statements?Group of answer choicesThe ability to use power over the investee to affect the amount of the investor’s returns.Dominating the decision making of the investee.Power over the investee.Exposure, or rights, to variable returns from involvement with the investee.
Which of the following statements is NOT true?a.Joint control can exist where share ownership by investing companies is not equal.b.If a company has control over the financial policies of another entity, it is deemed to have control over the operating policies.c.A reporting entity is a single entity that meets certain criteria.d.b and c are not true.
State the reasons for maintaining control accounts.
In AASB 3, the indicators of an acquiring entity’s power to control the other combining entities in a business combination include the power to:Exercise more than half of the voting rights in another entity through the site of the voting power or by virtue of an agreement with other investors.Appoint or remove a majority of the members of the governing body of the acquired entities.Cast the majority of votes at meetings of the governing body.Submit a shareholder proposal to the management team for consideration.Which of the following is correct: a. i and ii b. ii and iv c. i, ii and iii d. i,ii, iii and iv
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