What is the Difference Between IAS 27 and IFRS 10?
🆚 Go to Comparative Table 🆚The main difference between IAS 27 and IFRS 10 lies in the concept of control and the assessment of whether an investor has control over an investee.
IAS 27, also known as "Consolidated and Separate Financial Statements," does not provide specific guidance on assessing whether an investor is a principal or an agent. In contrast, IFRS 10, or "Consolidated Financial Statements," specifically requires that an investor with decision-making rights must act as a principal and not an agent to have control.
Some other differences between IAS 27 and IFRS 10 include:
- Terminology: IFRS 10 replaces the term "parent company" with "investor" and refers to the "holding company" as the "investee".
- Effective Date: IAS 27 was reissued in July 2009, while IFRS 10 was effective for accounting periods beginning after January 2013.
- Scope: IFRS 10 provides a single consolidation model that identifies control as the basis for consolidation for all types of entities, replacing both IAS 27 and SIC-12 (Consolidation—Special Purpose Entities).
In summary, IFRS 10 introduces a new definition of control and a single consolidation model, which significantly impacts the assessment of control in consolidated financial statements compared to IAS 27.
Comparative Table: IAS 27 vs IFRS 10
The main differences between IAS 27 and IFRS 10 are related to the criteria for consolidation and the definition of control. Here is a table summarizing the key differences:
| Feature | IAS 27 - Consolidated and Separate Financial Statements | IFRS 10 - Consolidated Financial Statements |
|---|---|---|
| Criteria for Consolidation | Control based on majority ownership and power to govern the financial and operating policies of the investee | Control based on power over relevant activities and exposure or rights to variable returns from its involvement with the investee |
| Control Definition | Controlled when risks and rewards of ownership have been transferred to the investor and the investor has the ability to control the relevant activities of the investee | Controlled when the investor has existing rights that give the current ability to direct the relevant activities of the investee |
| Consolidation Model | Single consolidation model for all types of entities | Applicable only to entities that are not investment entities |
| Applicability | Applies to all entities preparing consolidated financial statements, except for post-employment benefit plans or other long-term employee benefit plans to which IAS 19 applies | Not applicable to post-employment benefit plans or other long-term employee benefit plans to which IAS 19 applies |
| Guidance on Control Assessments | Limited guidance on control assessments | Provides guidance on more difficult control assessments, including agency relationships, control over structured entities, potential voting rights, and control |
IFRS 10 introduced a new definition of control and provides detailed application guidance, while IAS 27 focused on majority ownership and power to govern the financial and operating policies of the investee.
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