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TMI BlogConsolidated Financial StatementsX X X X Extracts X X X X X X X X Extracts X X X X ..... s; and (e) defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity. 3 This Ind AS does not deal with the accounting requirements for business combinations and their effect on consolidation, including goodwill arising on a business combination (see Ind AS 103, Business Combinations). Scope 4 An entity that is a parent shall present consolidated financial statements. This Ind AS applies to all entities, except as follows: (a) A parent need not present consolidated financial statements if it meets all the following conditions: (i) it is a wholly-owned subsidiary or is a partially-owned subsidiary of another entity and all 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; (ii) 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); (iii) it did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has power over an investee when the investor has existing rights that give it the current ability to direct the relevant activities, ie the activities that significantly affect the investee's returns. 11 Power arises from rights. Sometimes assessing power is straightforward, such as when power over an investee is obtained directly and solely from the voting rights granted by equity instruments such as shares, and can be assessed by considering the voting rights from those shareholdings. In other cases, the assessment will be more complex and require more than one factor to be considered, for example when power results from one or more contractual arrangements. 12 An investor with the current ability to direct the relevant activities has power even if its rights to direct have yet to be exercised. Evidence that the investor has been directing relevant activities can help determine whether the investor has power, but such evidence is not, in itself, conclusive in determining whether the investor has power over an investee. 13 If two or more investors each have existing rights that give them the unilateral ability to direct different relevant activities, the investor that has the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of the subsidiary are equity transactions (ie transactions with owners in their capacity as owners). 24 Paragraphs B94-B96 set out guidance for the accounting for non-controlling interests in consolidated financial statements. Loss of control 25 If a parent loses control of a subsidiary, the parent: (a) derecognises the assets and liabilities of the former subsidiary from the consolidated balance sheet. (b) recognises any investment retained in the former subsidiary at its fair value when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant Ind ASs. That fair value shall be regarded as the fair value on initial recognition of a financial asset in accordance with Ind AS 109 or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture. (c) recognises the gain or loss associated with the loss of control attributable to the former controlling interest. 26 Paragraphs B97-B99 set out guidance for the accounting for the loss of control. Determining whether an entity is an investment entity 27 A parent shall determine whether it is an investment entity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main purpose and activities are providing services that relate to the investment entity's investment activities (see paragraphs B85C-B85E), it shall consolidate that subsidiary in accordance with paragraphs 19-26 of this Ind AS and apply the requirements of Ind AS 103 to the acquisition of any such subsidiary.] 33 A parent of an investment entity shall consolidate all entities that it controls, including those controlled through an investment entity subsidiary, unless the parent itself is an investment entity. Appendix A Defined terms This appendix is an integral part of the Ind AS. 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. decision maker An entity with decision-making rights that is either a principal or an agent for other parties. group A parent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing factors may assist in making that determination: (a) the purpose and design of the investee (see paragraphs B5-B8); (b) what the relevant activities are and how decisions about those activities are made (see paragraphs B11-B13); (c) whether the rights of the investor give it the current ability to direct the relevant activities (see paragraphs B14-B54); (d) whether the investor is exposed, or has rights, to variable returns from its involvement with the investee (see paragraphs B55-B57); and (e) whether the investor has the ability to use its power over the investee to affect the amount of the investor's return (see paragraphs B58-B72). B4 When assessing control of an investee, an investor shall consider the nature of its relationship with other parties (see paragraphs B73-B75). Purpose and design of an investee B5 When assessing control of an investee, an investor shall consider the purpose and design of the investee in order to identify the relevant activities, how decisions about the relevant activities are made, who has the current ability to direct those activities and who receives returns from those activities. B6 When an investee's purpose and design are co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) selecting, acquiring or disposing of assets; (d) researching and developing new products or processes; and (e) determining a funding structure or obtaining funding. B12 Examples of decisions about relevant activities include but are not limited to: (a) establishing operating and capital decisions of the investee, including budgets; and (b) appointing and remunerating an investee's key management personnel or service providers and terminating their services or employment. B13 In some situations, activities both before and after a particular set of circumstances arises or event occurs may be relevant activities. When two or more investors have the current ability to direct relevant activities and those activities occur at different times, the investors shall determine which investor is able to direct the activities that most significantly affect those returns consistently with the treatment of concurrent decision-making rights (see paragraph 13). The investors shall reconsider this assessment over time if relevant facts or circumstances change. Application examples Example 1 Two investors form an investee to develop and market a medical product. One investor is re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yments of the assets. The transaction is marketed to the debt investor as an investment with minimal exposure to the credit risk associated with the possible default of the assets in the portfolio because of the nature of these assets and because the equity tranche is designed to absorb the first losses of the investee. The returns of the investee are significantly affected by the management of the investee's asset portfolio, which includes decisions about the selection, acquisition and disposal of the assets within portfolio guidelines and the management upon default of any portfolio assets. All those activities are managed by the asset manager until defaults reach a specified proportion of the portfolio value (ie when the value of the portfolio is such that the equity tranche of the investee has been consumed). From that time, a third-party trustee manages the assets according to the instructions of the debt investor. Managing the investee's asset portfolio is the relevant activity of the investee. The asset manager has the ability to direct the relevant activities until defaulted assets reach the specified proportion of the portfolio value; the debt investor has the ability to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aphs B51-B54 together with paragraphs B18-B20. B18 In some circumstances it may be difficult to determine whether an investor's rights are sufficient to give it power over an investee. In such cases, to enable the assessment of power to be made, the investor shall consider evidence of whether it has the practical ability to direct the relevant activities unilaterally. Consideration is given, but is not limited, to the following, which, when considered together with its rights and the indicators in paragraphs B19 and B20, may provide evidence that the investor's rights are sufficient to give it power over the investee: (a) The investor can, without having the contractual right to do so, appoint or approve the investee's key management personnel who have the ability to direct the relevant activities. (b) The investor can, without having the contractual right to do so, direct the investee to enter into, or can veto any changes to, significant transactions for the benefit of the investor. (c) The investor can dominate either the nominations process for electing members of the investee's governing body or the obtaining of proxies from other holders of voting rights. (d) The inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estee, the greater is the incentive for the investor to obtain rights sufficient to give it power. Therefore, having a large exposure to variability of returns is an indicator that the investor may have power. However, the extent of the investor's exposure does not, in itself, determine whether an investor has power over the investee. B21 When the factors set out in paragraph B18 and the indicators set out in paragraphs B19 and B20 are considered together with an investor's rights, greater weight shall be given to the evidence of power described in paragraph B18. Substantive rights B22 An investor, in assessing whether it has power, considers only substantive rights relating to an investee (held by the investor and others). For a right to be substantive, the holder must have the practical ability to exercise that right. B23 Determining whether rights are substantive requires judgement, taking into account all facts and circumstances. Factors to consider in making that determination include but are not limited to: (a) Whether there are any barriers (economic or otherwise) that prevent the holder (or holders) from exercising the rights. Examples of such barriers include but are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the money or the investor would benefit for other reasons (eg by realising synergies between the investor and the investee) from the exercise or conversion of the instrument. B24 To be substantive, rights also need to be exercisable when decisions about the direction of the relevant activities need to be made. Usually, to be substantive, the rights need to be currently exercisable. However, sometimes rights can be substantive, even though the rights are not currently exercisable. Application examples Example 3 The investee has annual shareholder meetings at which decisions to direct the relevant activities are made. The next scheduled shareholders' meeting is in eight months. However, shareholders that individually or collectively hold at least 5 per cent of the voting rights can call a special meeting to change the existing policies over the relevant activities, but a requirement to give notice to the other shareholders means that such a meeting cannot be held for at least 30 days. Policies over the relevant activities can be changed only at special or scheduled shareholders' meetings. This includes the approval of material sales of assets as well as the making or disposin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As long as the rights are not merely protective (see paragraphs B26-B28), substantive rights held by other parties may prevent the investor from controlling the investee even if the rights give the holders only the current ability to approve or block decisions that relate to the relevant activities. Protective rights B26 In evaluating whether rights give an investor power over an investee, the investor shall assess whether its rights, and rights held by others, are protective rights. Protective rights relate to fundamental changes to the activities of an investee or apply in exceptional circumstances. However, not all rights that apply in exceptional circumstances or are contingent on events are protective (see paragraphs B13 and B53). B27 Because protective rights are designed to protect the interests of their holder without giving that party power over the investee to which those rights relate, an investor that holds only protective rights cannot have power or prevent another party from having power over an investee (see paragraph 14). B28 Examples of protective rights include but are not limited to: (a) a lender's right to restrict a borrower from undertaking activities t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e directed through voting rights. Power with a majority of the voting rights B35 An investor that holds more than half of the voting rights of an investee has power in the following situations, unless paragraph B36 or paragraph B37 applies: (a) the relevant activities are directed by a vote of the holder of the majority of the voting rights, or (b) a majority of the members of the governing body that directs the relevant activities are appointed by a vote of the holder of the majority of the voting rights. Majority of the voting rights but no power B36 For an investor that holds more than half of the voting rights of an investee, to have power over an investee, the investor's voting rights must be substantive, in accordance with paragraphs B22-B25, and must provide the investor with the current ability to direct the relevant activities, which often will be through determining operating and financing policies. If another entity has existing rights that provide that entity with the right to direct the relevant activities and that entity is not an agent of the investor, the investor does not have power over the investee. B37 An investor does not have power over an investee, e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant activities unilaterally. B42 When assessing whether an investor's voting rights are sufficient to give it power, an investor considers all facts and circumstances, including: (a) the size of the investor's holding of voting rights relative to the size and dispersion of holdings of the other vote holders, noting that: (i) the more voting rights an investor holds, the more likely the investor is to have existing rights that give it the current ability to direct the relevant activities; (ii) the more voting rights an investor holds relative to other vote holders, the more likely the investor is to have existing rights that give it the current ability to direct the relevant activities; (iii) the more parties that would need to act together to outvote the investor, the more likely the investor is to have existing rights that give it the current ability to direct the relevant activities; (b) potential voting rights held by the investor, other vote holders or other parties (see paragraphs B47-B50); (c) rights arising from other contractual arrangements (see paragraph B40); and (d) any additional facts and circumstances that indicate the investor has, or does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er investor A has power. B44 In other situations, it may be clear after considering the factors listed in paragraph B42 (a)-(c) alone that an investor does not have power. Application example Example 6 Investor A holds 45 per cent of the voting rights of an investee. Two other investors each hold 26 per cent of the voting rights of the investee. The remaining voting rights are held by three other shareholders, each holding 1 per cent. There are no other arrangements that affect decision-making. In this case, the size of investor A's voting interest and its size relative to the other shareholdings are sufficient to conclude that investor A does not have power. Only two other investors would need to co-operate to be able to prevent investor A from directing the relevant activities of the investee. B45 However, the factors listed in paragraph B42 (a)-(c) alone may not be conclusive. If an investor, having considered those factors, is unclear whether it has power, it shall consider additional facts and circumstances, such as whether other shareholders are passive in nature as demonstrated by voting patterns at previous shareholders' meetings. This includes the assessment of the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control the investee. Potential voting rights B47 When assessing control, an investor considers its potential voting rights as well as potential voting rights held by other parties, to determine whether it has power. Potential voting rights are rights to obtain voting rights of an investee, such as those arising from convertible instruments or options, including forward contracts. Those potential voting rights are considered only if the rights are substantive (see paragraphs B22-B25). B48 When considering potential voting rights, an investor shall consider the purpose and design of the instrument, as well as the purpose and design of any other involvement the investor has with the investee. This includes an assessment of the various terms and conditions of the instrument as well as the investor's apparent expectations, motives and reasons for agreeing to those terms and conditions. B49 If the investor also has voting or other decision-making rights relating to the investee's activities, the investor assesses whether those rights, in combination with potential voting rights, give the investor power. B50 Substantive potential voting rights alone, or in combination with other ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on terms and features of the involvement provide the investor with rights that are sufficient to give it power. Being involved in the design of an investee alone is not sufficient to give an investor control. However, involvement in the design may indicate that the investor had the opportunity to obtain rights that are sufficient to give it power over the investee. B52 In addition, an investor shall consider contractual arrangements such as call rights, put rights and liquidation rights established at the investee's inception. When these contractual arrangements involve activities that are closely related to the investee, then these activities are, in substance, an integral part of the investee's overall activities, even though they may occur outside the legal boundaries of the investee. Therefore, explicit or implicit decision-making rights embedded in contractual arrangements that are closely related to the investee need to be considered as relevant activities when determining power over the investee. B53 For some investees, relevant activities occur only when particular circumstances arise or events occur. The investee may be designed so that the direction of its activities an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e only assets of an investee are receivables. When the purpose and design of the investee are considered, it is determined that the only relevant activity is managing the receivables upon default. The party that has the ability to manage the defaulting receivables has power over the investee, irrespective of whether any of the borrowers have defaulted. B54 An investor may have an explicit or implicit commitment to ensure that an investee continues to operate as designed. Such a commitment may increase the investor's exposure to variability of returns and thus increase the incentive for the investor to obtain rights sufficient to give it power. Therefore a commitment to ensure that an investee operates as designed may be an indicator that the investor has power, but does not, by itself, give an investor power, nor does it prevent another party from having power. Exposure, or rights, to variable returns from an investee B55 When assessing whether an investor has control of an investee, the investor determines whether it is exposed, or has rights, to variable returns from its involvement with the investee. B56 Variable returns are returns that are not fixed and have the potential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party or parties (the principal(s)) and therefore does not control the investee when it exercises its decision-making authority (see paragraphs 17 and 18). Thus, sometimes a principal's power may be held and exercisable by an agent, but on behalf of the principal. A decision maker is not an agent simply because other parties can benefit from the decisions that it makes. B59 An investor may delegate its decision-making authority to an agent on some specific issues or on all relevant activities. When assessing whether it controls an investee, the investor shall treat the decision-making rights delegated to its agent as held by the investor directly. In situations where there is more than one principal, each of the principals shall assess whether it has power over the investee by considering the requirements in paragraphs B5-B54. Paragraphs B60-B72 provide guidance on determining whether a decision maker is an agent or a principal. B60 A decision maker shall consider the overall relationship between itself, the investee being managed and other parties involved with the investee, in particular all the factors below, in determining whether it is an agent: (a) the scope of its decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision maker acts primarily on behalf and for the benefit of others. In addition, the greater the number of parties required to act together to exercise rights to remove a decision maker and the greater the magnitude of, and variability associated with, the decision maker's other economic interests (ie remuneration and other interests), the less the weighting that shall be placed on this factor. B66 Substantive rights held by other parties that restrict a decision maker's discretion shall be considered in a similar manner to removal rights when evaluating whether the decision maker is an agent. For example, a decision maker that is required to obtain approval from a small number of other parties for its actions is generally an agent. (See paragraphs B22-B25 for additional guidance on rights and whether they are substantive.) B67 Consideration of the rights held by other parties shall include an assessment of any rights exercisable by an investee's board of directors (or other governing body) and their effect on the decision-making authority (see paragraph B23 (b)). Remuneration B68 The greater the magnitude of, and variability associated with, the decision maker's remuneration r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s set out in the investment mandate as required by its local laws and regulations. The fund was marketed to investors as an investment in a diversified portfolio of equity securities of publicly traded entities. Within the defined parameters, the fund manager has discretion about the assets in which to invest. The fund manager has made a 10 per cent pro rata investment in the fund and receives a market based fee for its services equal to 1 per cent of the net asset value of the fund. The fees are commensurate with the services provided. The fund manager does not have any obligation to fund losses beyond its 10 per cent investment. The fund is not required to establish, and has not established, an independent board of directors. The investors do not hold any substantive rights that would affect the decision-making authority of the fund manager, but can redeem their interests within particular limits set by the fund. Although operating within the parameters set out in the investment mandate and in accordance with the regulatory requirements, the fund manager has decision-making rights that give it the current ability to direct the relevant activities of the fund-the investors do not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ager by a simple majority vote, but only for breach of contract. The fund manager's 2 per cent investment increases its exposure to variability of returns from the activities of the fund without creating exposure that is of such significance that it indicates that the fund manager is a principal. The other investors' rights to remove the fund manager are considered to be protective rights because they are exercisable only for breach of contract. In this example, although the fund manager has extensive decision-making authority and is exposed to variability of returns from its interest and remuneration, the fund manager's exposure indicates that the fund manager is an agent. Thus, the fund manager concludes that it does not control the fund. Example 14B The fund manager has a more substantial pro rata investment in the fund, but does not have any obligation to fund losses beyond that investment. The investors can remove the fund manager by a simple majority vote, but only for breach of contract. In this example, the other investors' rights to remove the fund manager are considered to be protective rights because they are exercisable only for breach of contract. Although the fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dicate that the fund manager is an agent. Thus, the fund manager concludes that it does not control the fund. Example 15 An investee is created to purchase a portfolio of fixed rate asset-backed securities, funded by fixed rate debt instruments and equity instruments. The equity instruments are designed to provide first loss protection to the debt investors and receive any residual returns of the investee. The transaction was marketed to potential debt investors as an investment in a portfolio of asset-backed securities with exposure to the credit risk associated with the possible default of the issuers of the asset-backed securities in the portfolio and to the interest rate risk associated with the management of the portfolio. On formation, the equity instruments represent 10 per cent of the value of the assets purchased. A decision maker (the asset manager) manages the active asset portfolio by making investment decisions within the parameters set out in the investee's prospectus. For those services, the asset manager receives a market-based fixed fee (ie 1 per cent of assets under management) and performance-related fees (ie 10 per cent of profits) if the investee's profits ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the conduit. The sponsor establishes the terms of the conduit and manages the operations of the conduit for a market-based fee. The fee is commensurate with the services provided. The sponsor approves the sellers permitted to sell to the conduit, approves the assets to be purchased by the conduit and makes decisions about the funding of the conduit. The sponsor must act in the best interests of all investors. The sponsor is entitled to any residual return of the conduit and also provides credit enhancement and liquidity facilities to the conduit. The credit enhancement provided by the sponsor absorbs losses of up to 5 per cent of all of the conduit's assets, after losses are absorbed by the transferors. The liquidity facilities are not advanced against defaulted assets. The investors do not hold substantive rights that could affect the decision-making authority of the sponsor. Even though the sponsor is paid a market-based fee for its services that is commensurate with the services provided, the sponsor has exposure to variability of returns from the activities of the conduit because of its rights to any residual returns of the conduit and the provision of credit enhancement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c) a party that has agreed not to sell, transfer or encumber its interests in the investee without the investor's prior approval (except for situations in which the investor and the other party have the right of prior approval and the rights are based on mutually agreed terms by willing independent parties). (d) a party that cannot finance its operations without subordinated financial support from the investor. (e) an investee for which the majority of the members of its governing body or for which its key management personnel are the same as those of the investor. (f) a party that has a close business relationship with the investor, such as the relationship between a professional service provider and one of its significant clients. Control of specified assets B76 An investor shall consider whether it treats a portion of an investee as a deemed separate entity and, if so, whether it controls the deemed separate entity. B77 An investor shall treat a portion of an investee as a deemed separate entity if and only if the following condition is satisfied: Specified assets of the investee (and related credit enhancements, if any) are the only source of payment for specified li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing an investee have lapsed. B83 An investor also considers changes affecting its exposure, or rights, to variable returns from its involvement with an investee. For example, an investor that has power over an investee can lose control of an investee if the investor ceases to be entitled to receive returns or to be exposed to obligations, because the investor would fail to satisfy paragraph 7(b) (eg if a contract to receive performance-related fees is terminated). B84 An investor shall consider whether its assessment that it acts as an agent or a principal has changed. Changes in the overall relationship between the investor and other parties can mean that an investor no longer acts as an agent, even though it has previously acted as an agent, and vice versa. For example, if changes to the rights of the investor, or of other parties, occur, the investor shall reconsider its status as a principal or an agent. B85 An investor's initial assessment of control or its status as a principal or an agent would not change simply because of a change in market conditions (eg a change in the investee's returns driven by market conditions), unless the change in market conditions changes one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss activity or a separate substantial source of income to the investment entity: (a) providing management services and strategic advice to an investee; and (b) providing financial support to an investee, such as a loan, capital commitment or guarantee. 6[B85E If an investment entity has a subsidiary that is not itself an investment entity and whose main purpose and activities are providing investment-related services or activities that relate to the investment entity's investment activities, such as those described in paragraphs B85C-B85D, to the entity or other parties, it shall consolidate that subsidiary in accordance with paragraph 32. If the subsidiary that provides the investment-related services or activities is itself an investment entity, the investment entity parent shall measure that subsidiary at fair value through profit or loss in accordance with paragraph 31. ] Exit strategies B85F An entity's investment plans also provide evidence of its business purpose. One feature that differentiates an investment entity from other entities is that an investment entity does not plan to hold its investments indefinitely; it holds them for a limited period. Because equity in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such benefits include: (a) the acquisition, use, exchange or exploitation of the processes, assets or technology of an investee. This would include the entity or another group member having disproportionate, or exclusive, rights to acquire assets, technology, products or services of any investee; for example, by holding an option to purchase an asset from an investee if the asset's development is deemed successful; (b) joint arrangements (as defined in Ind AS 111) or other agreements between the entity or another group member and an investee to develop, produce, market or provide products or services; (c) financial guarantees or assets provided by an investee to serve as collateral for borrowing arrangements of the entity or another group member (however, an investment entity would still be able to use an investment in an investee as collateral for any of its borrowings); (d) an option held by a related party of the entity to purchase, from that entity or another group member, an ownership interest in an investee of the entity; (e) except as described in paragraph B85J, transactions between the entity or another group member and an investee that: (i) are on terms that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its liabilities at fair value. Typical characteristics of an investment entity B85N In determining whether it meets the definition of an investment entity, an entity shall consider whether it displays the typical characteristics of one (see paragraph 28). The absence of one or more of these typical characteristics does not necessarily disqualify an entity from being classified as an investment entity but indicates that additional judgement is required in determining whether the entity is an investment entity. More than one investment B85O An investment entity typically holds several investments to diversify its risk and maximise its returns. An entity may hold a portfolio of investments directly or indirectly, for example by holding a single investment in another investment entity that itself holds several investments. B85P There may be times when the entity holds a single investment. However, holding a single investment does not necessarily prevent an entity from meeting the definition of an investment entity. For example, an investment entity may hold only a single investment when the entity: a) is in its start-up period and has not yet identified suitable investments and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its investors are related parties. Ownership interests B85V An investment entity is typically, but is not required to be, a separate legal entity. Ownership interests in an investment entity are typically in the form of equity or similar interests (eg partnership interests), to which proportionate shares of the net assets of the investment entity are attributed. However, having different classes of investors, some of which have rights only to a specific investment or groups of investments or which have different proportionate shares of the net assets, does not preclude an entity from being an investment entity. B85W In addition, an entity that has significant ownership interests in the form of debt that, in accordance with other applicable Ind ASs, does not meet the definition of equity, may still qualify as an investment entity, provided that the debt holders are exposed to variable returns from changes in the fair value of the entity's net assets. Accounting requirements Consolidation procedures B86 Consolidated financial statements: (a) combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction that currently gives the entity access to the returns associated with an ownership interest. In such circumstances, the proportion allocated to the parent and non controlling interests in preparing consolidated financial statements is determined by taking into account the eventual exercise of those potential voting rights and other derivatives that currently give the entity access to the returns. B91 Ind AS 109 does not apply to interests in subsidiaries that are consolidated. When instruments containing potential voting rights in substance currently give access to the returns associated with an ownership interest in a subsidiary, the instruments are not subject to the requirements of Ind AS 109. In all other cases, instruments containing potential voting rights in a subsidiary are accounted for in accordance with Ind AS 109. Reporting date B92 The financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements shall have the same reporting date. When the end of the reporting period of the parent is different from that of a subsidiary, the subsidiary prepares, for consolidation purposes, additional financial in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arent shall consider all the terms and conditions of the arrangements and their economic effects. One or more of the following indicate that the parent should account for the multiple arrangements as a single transaction: (a) They are entered into at the same time or in contemplation of each other. (b) They form a single transaction designed to achieve an overall commercial effect. (c) The occurrence of one arrangement is dependent on the occurrence of at least one other arrangement. (d) One arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements. An example is when a disposal of shares is priced below market and is compensated for by a subsequent disposal priced above market. B98 If a parent loses control of a subsidiary, it shall: (a) derecognise: (i) the assets (including any goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is lost; and (ii) the carrying amount of any non-controlling interests in the former subsidiary at the date when control is lost (including any components of other comprehensive income attributable to them). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment entity, it shall cease to consolidate its subsidiaries at the date of the change in status, except for any subsidiary that shall continue to be consolidated in accordance with paragraph 32. The investment entity shall apply the requirements of paragraphs 25 and 26 to those subsidiaries that it ceases to consolidate as though the investment entity had lost control of those subsidiaries at that date. Appendix C References to matters contained in other Indian Accounting Standards This Appendix is an integral part of the Ind AS. 1. Appendix A, Distribution of Non-cash Assets to Owners contained, in Ind AS 10, Events after the Reporting Period, makes reference to this Standard also. 2. Appendix A, Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds, contained in Ind AS 37, Provisions, Contingent Liabilities and Contingent Assets, makes reference to this Standard also. Appendix 1 Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this Appendix is only to bring out the major differences, if any, between Indian Accounting Standard (Ind AS) 110 and the corresponding International Financial Reportin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 4. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "32 Notwithstanding the requirement in paragraph 31, if an investment entity has a subsidiary that provides services that relate to the investment entity's investment activities (see paragraphs B85C-B85E), it shall consolidate that subsidiary in accordance with paragraphs 19-26 of this Ind AS and apply the requirements of Ind AS 103 to the acquisition of any such subsidiary." 5. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "B85C An investment entity may provide investment-related services (eg investment advisory services, investment management, investment support and administrative services), either directly or through a subsidiary, to third parties as well as to its investors, even if those activities are substantial to the entity." 6. Substituted vide F. No. 01/01/2009-CL-V(Part) - Dated 30-3-2016 before it was read as, "B85E If an investment entity has a subsidiary that provides investment-related services or activities, such as those described in paragraphs B85C-B85D, to the entity or other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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