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Wiley lFRS: Practical Implementation Guide and Workbook
blocking rights were not intended to deprive it of its ability to control the subsidiary and have
never been used as such. TPSA considers that it continues to exercise control under lAS 27 and
continues to consolidate the subsidiary.
4.3 A subsidiary cannot be excluded from consolidation because its business is dissimilar from
that of the other entities within the group.
4.4
An entity loses control when it loses the power to govern its financial and operating policies.
This could occur, for example, where a subsidiary becomes subject to the control of the govern–
ment, a regulator, a court of law, or as a result of a contractual agreement.
4.5 The Standard does not require the consolidation of a subsidiary where the control is intended
to be temporary. There should be evidence that the subsidiary has been acquired with the intention
to dispose of it within 12 months and that management is actively seeking a buyer.
4.6 A subsidiary that has previously been excluded from consolidation and is not disposed of
within the 12-month period must be consolidated from the date of acquisition.
4.7 A subsidiary that is operating under severe long-term restrictions that impair its ability to
transfer funds to the parent should not be excluded from consolidation. Control must be lost for the
exclusion to happen.
Case Study 1
Facts
There are currently severe restrictions on the repatriation of dividends from a subsidiary located in
Country A. As a result, the directors of the parent entity wish to deconsolidate the subsidiary as they feel
that this restriction may be in place for several years. Two subsidiaries located in the country are indi–
vidually immaterial but collectively material. The directors also wish to deconsolidate these entities.
Required
Can the results of these subsidiaries be deconsolidated?
Solution
Control must be lost for deconsolidation to occur, and the impairment of the ability to transfer funds is
not sufficient reason. Therefore, the subsidiary should be consolidated. Also, IFRS do not apply to im–
material items, but the two subsidiaries should be taken together and in this instance are material. Hence
this is also not a reason for deconsolidation.
5. ACCOUNTING PROCEDURES
5.1 The group must use uniform accounting policies for reporting transactions, without excep-
tion.
Case Study 2
Facts
A French parent entity uses a revaluation method to value its property, but an American subsidiary uses
the cost basis for valuation. The directors feel that it is not practical to keep revaluing the property of the
American subsidiary and wish to discontinue revaluing the property on consolidation.
Required
Must uniform accounting policies be used under lAS 27?
Solution
Uniform accounting policies must be used by the group. There are no exceptions under lAS 27, even if it
is not practical to use uniform policies.
5.2 Minority interests must be presented separately from the parent entity's equity and must be
shown within equity. Minority interest in the profit or loss of the group should also be presented
separately.