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Forensic Accounting

Can a company limited by guarantee be consolidated by the company that appoints the trusttes and the board


Can a company that does not directly own shares in another company because the other company is a company limited by guarantee and whose shareholders are trustees holding shares on behalf of another company be consolidated on the basis of significant control.

asked Jan 31 in IFRS 10 - Consolidated Financial Statements by anonymous

1 Answer

0 votes
Deciding whether a company is a parent depends on the existence of control.

IAS 27 (revised) defines control as ‘the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.’

Control is assumed to exist when the parent owns directly, or indirectly through
other subsidiaries, more than 50% of the voting power of the entity, unless in
exceptional circumstances it can be clearly demonstrated that such control does not
exist.

Control also exists when the entity (parent) owns 50% or less than 50% of the voting power of the entity but any of the following circumstances also applies:

„   The entity has power over more than 50% of the voting rights in the subsidiary
      by virtue of an agreement with other investors.

„   The entity has power to govern the financial and operating policies of the
      subsidiary entity under a statute or agreement.

„   The entity has power to appoint or remove a majority of the members of the
      board of directors of the subsidiary, and the board of directors has control over
      the entity.

„   The entity has power to cast a majority of votes at meetings of the board of
      directors of the subsidiary, and the board of directors has control over the entity.

in case of any confusion, you can further questions

Regards
answered Feb 1 by umarhussainia Level 4 Member (8,820 points)



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