The IFRS Interpretations Committee has clarified an important control-assessment point under IFRS 10 Consolidated Financial Statements. Where an investee’s governing document changes in a way that could affect its relevant activities, or the rights of the parties involved, the investor should reassess whether it still controls the investee.

The issue was considered in a recent agenda decision published by the IFRS Foundation. The International Accounting Standards Board did not object to the Committee’s conclusion, which means the matter will not be taken forward as a separate standard-setting project. The decision does not create a new IFRS requirement, but it reinforces how an existing requirement should be applied in the fact pattern considered. Read the IFRIC agenda decision.

What changed in the interpretation?

The fact pattern involved an entity that had helped establish an investee and had previously concluded that it controlled the investee under IFRS 10. At a later stage, the investee’s governing document was amended. The amendments could change the investee’s relevant activities and the rights of the entity and other parties in relation to those activities.

The Committee concluded that the entity reassesses whether it retains control when those circumstances arise. It also found that the matter did not have sufficiently widespread effect to justify a new standard-setting project.

The IASB’s October 2026 update records that the Board considered the agenda decision and that no member objected. The update also confirms that the decision relates to the application of IFRS 10 rather than a new amendment to the Standard. Review the IASB’s October 2026 update.

Who may be affected?

The clarification is relevant to groups that consolidate subsidiaries, structured entities or other investees under IFRS. In South Africa, this may include private groups, larger owner-managed businesses and entities preparing IFRS financial statements for lenders, investors, regulators or other stakeholders.

The issue is most likely to arise after changes to shareholder agreements, trust deeds, partnership arrangements, voting rights, reserved matters, board appointment rights or other documents that determine how an investee’s activities are directed.

What finance teams should check

  • Identify governance changes: Review amendments to constitutions, shareholder agreements, trust deeds and similar documents during the reporting period.
  • Map relevant activities: Determine whether the changes affect the activities that significantly influence the investee’s returns.
  • Reassess decision-making rights: Consider voting rights, appointment rights, vetoes and contractual arrangements rather than relying only on ownership percentages.
  • Document the conclusion: Keep a clear record of the control assessment, the documents reviewed and the reasons for retaining or changing the consolidation treatment.
  • Coordinate early: Discuss potentially significant changes with the finance team, auditor and legal advisers before year-end reporting is completed.

Practical next steps

Businesses should add control reassessment to their year-end reporting checklist whenever an investee’s governing documents change. The review should be completed before management finalises the group structure, consolidation entries and related disclosures.

This is particularly important where a transaction changes the balance of decision-making rights without changing the legal ownership percentage. A control conclusion that was appropriate when an arrangement was established may need to be revisited if the underlying rights or relevant activities have changed.

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