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IFRS 10

Consolidated Financial Statements

IFRS 10 establishes a single control-based model for determining when an entity consolidates another entity, requiring consolidation whenever an investor has power over an investee, exposure or rights to variable returns from its involvement, and the ability to use that power to affect the amount of those returns. [S1]

Effective 2013-01-01Related: IAS 1 · IAS 21 · IAS 27 · IAS 28 · IFRS 3 · IFRS 12

Overview

IFRS 10 replaced a mixed risks-and-rewards/voting-rights consolidation model with a single definition of control, applied consistently to all types of investee, including traditional voting-rights-controlled subsidiaries and 'structured entities' where voting rights are not the dominant factor. [S1] Control exists only when all three elements are present simultaneously: power over the investee, exposure or rights to variable returns from involvement with the investee, and the ability to use power to affect the amount of the investor's returns. [S2] Where control exists, the parent consolidates the investee regardless of the size of its ownership percentage, and consolidation continues to be reassessed whenever facts and circumstances change.

Why it matters

Getting the control assessment wrong either hides a subsidiary's debts, losses or risks outside the group's consolidated financial statements (understating the group's true size and risk profile) or forces consolidation of an entity the parent doesn't actually control (overstating group assets and complicating the accounts unnecessarily). For Nigerian group structures — which frequently combine formal shareholding with informal family or director-level influence — the control assessment is rarely a simple percentage-ownership calculation, and getting it right or wrong can materially change the group's reported leverage, size, and risk profile presented to lenders and regulators.

Scope

Applies to entities that are parents (having control of one or more other entities), except post-employment benefit plans or other long-term employee benefit plans within IAS 19, and provides an exemption from preparing consolidated financial statements for a parent that meets specific conditions (e.g. it is itself a wholly-owned, or partially-owned with no objection from other owners, subsidiary of another entity, and its own securities are not publicly traded). Investment entities are required to measure particular subsidiaries at fair value through profit or loss under IFRS 9 rather than consolidating them, subject to specific criteria.

Key definitions

term
Control of an investee
definition
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.
term
Power
definition
Existing rights that give the current ability to direct the relevant activities of the investee — the activities that significantly affect the investee's returns.
term
Variable returns
definition
Returns that are not fixed and have the potential to vary as a result of the investee's performance, which can be positive, negative, or both.
term
Structured entity
definition
An entity designed so that voting or similar rights are not the dominant factor in deciding who controls it, such as where relevant activities are directed by contractual arrangements.
term
De facto control
definition
Control arising in substance from an investor's dominant relative shareholding and other factors (e.g. widely dispersed remaining shareholdings, historical voting patterns) even without holding a majority of voting rights.
term
Non-controlling interest (NCI)
definition
The equity in a subsidiary not attributable, directly or indirectly, to a parent.

Recognition

A reporting entity assesses control at the outset of a relationship with an investee and reassesses it whenever facts and circumstances indicate a change in one or more of the three control elements. Power typically arises from voting rights, but can also arise from contractual arrangements alone (as in some structured entities), and an investor with less than a majority of voting rights may still have power through a dominant shareholding combined with the relative dispersion of other shareholdings (de facto control), or through substantive potential voting rights (e.g. currently exercisable options or convertible instruments) that the holder has the practical ability to exercise.

Initial measurement

On obtaining control (typically through a business combination), the acquirer applies IFRS 3 to measure identifiable assets acquired and liabilities assumed generally at their acquisition-date fair values, recognising any goodwill (or gain from a bargain purchase) and a non-controlling interest, measured either at fair value or at its proportionate share of the subsidiary's identifiable net assets, as an accounting policy choice made on a transaction-by-transaction basis.

Subsequent measurement

Consolidated financial statements combine the financial statements of the parent and its subsidiaries line by line, adding together like items of assets, liabilities, equity, income, expenses and cash flows, using uniform accounting policies for like transactions across the group (adjusting a subsidiary's financial statements if it uses different policies), and eliminating intra-group balances, transactions, income and expenses in full. Changes in a parent's ownership interest that do not result in a loss of control are accounted for as equity transactions (adjusting non-controlling interests, with no gain or loss recognised in profit or loss); if control is lost, any retained interest is remeasured to fair value, with the difference recognised in profit or loss.

Presentation

Non-controlling interests are presented within equity in the consolidated statement of financial position, separately from the equity attributable to owners of the parent. Profit or loss and each component of other comprehensive income are attributed to owners of the parent and to non-controlling interests, even if this results in the non-controlling interests having a deficit balance. Total comprehensive income is attributed in the same way.

Disclosure checklist

  • Significant judgements and assumptions made in determining that the entity has (or does not have) control of another entity, particularly where the assessment is not straightforward (e.g. de facto control, structured entities).
  • The composition of the group, including the name, principal place of business, and proportion of ownership interests and voting rights held by non-controlling interests for each material subsidiary.
  • Nature and extent of significant restrictions on the ability to access or use group assets and settle group liabilities.
  • Nature of, and changes in, the risks associated with an entity's interests in consolidated structured entities.
  • For subsidiaries with material non-controlling interests: summarised financial information about each such subsidiary.
  • The nature and effect of any changes in ownership interest that do not result in a loss of control.

Practical treatment

The practical discipline is documenting the control assessment explicitly for every investee, not just the obviously majority-owned ones: list the relevant activities that significantly affect the investee's returns, identify who has current power to direct them, quantify exposure to variable returns (dividends, fees, residual risk), and confirm the link between power and returns. This is especially important for minority shareholdings with disproportionate board representation or veto rights, structured financing vehicles, and entities where informal family or personal influence may create de facto control that a simple shareholding percentage would miss entirely. See nigeria_notes for the Nigerian group-structure and family-business scenarios where this judgement is most consequential.

Common mistakes

  • Consolidating (or not consolidating) an investee based purely on the percentage of shares held, without properly assessing power, variable returns and the link between them.
  • Failing to identify de facto control where an investor holds a large minority stake alongside widely dispersed remaining shareholders who have historically not coordinated to outvote it.
  • Not reassessing control when facts and circumstances change (e.g. a shareholders' agreement is renegotiated, or a previously dormant veto right becomes exercisable).
  • Applying different accounting policies across group entities without adjusting for uniform group policies on consolidation.
  • Failing to eliminate intra-group balances and transactions in full, including unrealised profits on intra-group sales of inventory or PPE.
  • Treating non-controlling interests as a liability rather than presenting them within equity.

CFO checklist

  • Maintain a documented control assessment for every investee in the group structure, updated whenever shareholder agreements, board composition, or financing arrangements change.
  • Confirm uniform accounting policies are applied across all consolidated entities, with adjustments made for any subsidiary using different local policies.
  • Reconcile intra-group balances and eliminate intra-group transactions and unrealised profits in full at each consolidation.
  • Reassess non-controlling interest measurement policy (fair value versus proportionate share of net assets) consistently, and document the choice made at each acquisition.
  • Review minority shareholdings with board representation, veto rights, or historically dispersed remaining shareholders for potential de facto control.
  • Confirm CAMA 2020 group financial statement requirements are being met in addition to, not instead of, IFRS 10's own consolidation scope.

FAQs

q
We own 40% of a company but appoint 3 of its 5 board members under a shareholders' agreement — do we consolidate it?
a
Very possibly, yes. Ownership percentage alone does not determine control under IFRS 10; if the shareholders' agreement gives the entity the current ability to direct the investee's relevant activities (through board control) and it is exposed to variable returns from that involvement, all three elements of control may be met despite holding less than a majority of shares.
q
Our founder's spouse owns 30% of a supplier company we also do significant business with — does this affect our consolidation scope?
a
Not directly for IFRS 10 consolidation unless the reporting entity itself has power, exposure to variable returns, and the ability to affect those returns over the supplier; a related party relationship (relevant to IAS 24 disclosure) is a distinct question from control (relevant to IFRS 10 consolidation), though the same facts can sometimes be relevant to both.
q
Do we still need to prepare separate Nigerian statutory accounts for each subsidiary if we consolidate under IFRS 10?
a
Yes. IFRS 10 consolidation for group reporting purposes does not remove each individual Nigerian subsidiary's own obligation to prepare separate statutory financial statements and file its own companies income tax return, since Nigerian tax and corporate filing obligations apply on a separate legal entity basis regardless of group consolidation.

Nigeria application notes

Regulatory overlay

IFRS 10 applies in full to Nigerian public interest entities under the FRCN Act 2011 mandate. [S3] CAMA 2020 separately requires a holding company to prepare group financial statements, reinforcing (from a company law perspective) the consolidation obligation that IFRS 10 governs from an accounting-standard perspective; the two frameworks operate alongside each other rather than one replacing the other. [S4] Board composition and shareholder-resolution mechanics under CAMA 2020 are also directly relevant evidence when assessing power over an investee in borderline Nigerian control assessments, since the practical ability to direct an investee's relevant activities often turns on who can appoint directors or pass ordinary/special resolutions in practice. [S5]

Tax interaction (Nigeria)

Nigerian companies income tax is assessed on a separate-legal-entity basis: each subsidiary in a consolidated group remains its own taxpayer, files its own CIT return, and is assessed at the standard 30% illustrative rate (or the applicable small-company or other rate, subject to qualifying conditions) independently of the group's consolidated accounting position; IFRS 10 consolidation for financial reporting does not create a consolidated tax group or a group-wide tax filing under current Nigerian tax law. [S6][S_TAX1][S_TAX2] Nigerian rates, thresholds, exemptions, incentives and filing rules referenced in this file (including CIT, VAT, withholding tax categories and rates, and the small-company threshold) should be independently verified against the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, CBN and FRCN guidance in force, and current NRS practice at the reporting or filing date, since thresholds, rates and reliefs are subject to periodic revision and to sector- or entity-specific qualifying conditions. This file does not constitute legal or tax advice. [S_TAX1][S_TAX2]

FX considerations

Where a Nigerian parent consolidates a foreign subsidiary with a different functional currency, the subsidiary's assets and liabilities are translated at the closing rate and its income and expenses at transaction-date (or average) rates on consolidation, consistent with IAS 21, with translation differences recognised in other comprehensive income; naira volatility can materially affect the reported consolidated position of a group with material foreign subsidiaries even where the underlying foreign-currency results are stable.

SME practical note

Nigerian family-controlled business groups often operate through multiple related companies with overlapping directorships and informal cross-guarantees or funding arrangements, without a single, clean majority-shareholding structure; Outliers treats mapping the actual control relationships (not just the cap table) as a mandatory first step before determining a group's IFRS 10 consolidation boundary, since informal influence can create de facto control that changes which entities should be consolidated.

Common Nigerian pitfalls

  • Assuming consolidation scope is defined purely by majority shareholding, missing de facto control arising from board composition, veto rights, or dominant minority shareholdings.
  • Treating IFRS 10 group consolidation as if it creates a consolidated tax filing, when Nigerian CIT remains assessed separately at the legal entity level.
  • Not reassessing control when family or informal governance arrangements change, even though no formal shareholding change occurred.
  • Overlooking CAMA 2020's own group financial statement requirement as a separate (though complementary) obligation to IFRS 10 consolidation.

FRC pronouncements

No FRCN pronouncement specific to the IFRS 10 control assessment has been identified; the relevant FRCN context is its overarching mandate to promote IFRS compliance and, under CAMA 2020, to enforce group financial reporting obligations. [S3][S4]

Worked examples

De facto control with a 35% shareholding

A Nigerian holding company owns 35% of the voting shares of an operating company. The remaining 65% is held by approximately 2,000 unrelated individual shareholders, none holding more than 1%, with historically low and passive attendance at general meetings. The holding company has consistently been able to direct the operating company's key operating and financing decisions at shareholder meetings over several years due to the dispersion and passivity of other shareholders.

Facts

Workings

Power: despite holding only 35% of voting rights, the size of the holding relative to the size and dispersion of other shareholdings, combined with the demonstrated practical ability to direct relevant activities at shareholder meetings, indicates the holding company has de facto power over the investee.

Variable returns: the holding company is exposed to variable returns through its dividend entitlement and share of net asset value.

Link between power and returns: the holding company has consistently used its de facto power to direct the activities affecting its returns.

Conclusion: all three elements of control are met; the operating company is a subsidiary and should be consolidated despite the sub-50% shareholding.

Elimination of an intra-group sale with unrealised profit

A Nigerian parent sells inventory to its wholly-owned subsidiary during the year for ₦30,000,000, having produced it at a cost of ₦22,000,000 (an intra-group profit of ₦8,000,000 recognised in the parent's separate accounts). At year-end, the subsidiary still holds the entire batch of inventory unsold to external customers.

Facts

Workings

Since the inventory remains within the group (held by the subsidiary, unsold externally), the ₦8,000,000 profit recognised in the parent's separate financial statements has not been realised from the group's perspective and must be eliminated on consolidation.

The intra-group revenue and cost of sales are also eliminated in full: 30,000,000 revenue and 22,000,000 cost of sales in the parent's separate books are removed from the consolidated statement of profit or loss.

The subsidiary's inventory, carried at 30,000,000 (its purchase cost from the parent), is reduced to the group's original cost of 22,000,000 in the consolidated statement of financial position.

Journal entries

Eliminate the unrealised profit on the intra-group sale of inventory on consolidation, reducing consolidated inventory to the group's original cost and removing the unrealised profit from consolidated profit or loss.

AccountDr (₦)Cr (₦)
Cost of sales (consolidated profit or loss)8,000,000
Inventory (consolidated statement of financial position)8,000,000

Sources & citations

  1. [S1]IFRS 10 Consolidated Financial Statements — IFRS Foundationaccessed 2026-07-18
  2. [S2]IFRS 10 Consolidated Financial Statements — IFRS in Brief — Moore Globalaccessed 2026-07-18
  3. [S3]IFRS - Use of IFRS Standards by jurisdiction: Nigeria — IFRS Foundationaccessed 2026-07-18
  4. [S4]Highlights of the provisions relating to financial statements, audit and annual returns in CAMA 2020 — Dentons ACAS-Lawaccessed 2026-07-18
  5. [S5]Navigating Corporate Decisions in Nigerian Companies Limited by Shares Under CAMA 2020 — The Legal Troveaccessed 2026-07-18
  6. [S6]Nigeria - Corporate - Taxes on corporate income — PwC Worldwide Tax Summariesaccessed 2026-07-18
  7. [S_TAX1]Nigeria Tax Act, 2025 has been signed – highlights — EY Globalaccessed 2026-07-18
  8. [S_TAX2]The Nigerian Tax Reform Acts — PwC Nigeriaaccessed 2026-07-18
Last reviewed 2026-07-18 · Reviewer: Rafiu Olawuyi, FCA (Author / Technical Reviewer)