Section A

According to IFRS 10 Consolidated Financial Statements, which of the following is NOT a required element to establish 'control' over an investee?

Answer options:

Power over the investee

Exposure, or rights, to variable returns from its involvement with the investee

Ownership of more than 50% of the voting rights

The ability to use its power over the investee to affect the amount of the investor's returns

How to approach this question

Recall the three elements of control under IFRS 10: Power, Exposure to variable returns, and Ability to use power to affect returns. Ownership percentage is an indicator, not a strict requirement.

Full Answer

C.Ownership of more than 50% of the voting rights✓ Correct

IFRS 10 defines control using three elements: (1) Power over the investee, (2) Exposure/rights to variable returns, and (3) Ability to use power to affect returns. While owning >50% of voting rights is the most common way to get power, it is not a strict requirement (e.g., control can be achieved through contractual arrangements).

Common mistakes

Assuming >50% ownership is the only definition of control.

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