Define the terms: (Section 7.7.1)

(a) Group;

(b) Parent company; and

(c) Subsidiary.

Data From Section 7.7.1:

The smallest group consists of two companies. A group is created when one company (the parent) has control of another company (the subsidiary). There is no upper limit to the number of companies which may form a group.

The International Accounting Standards Board has defined a group as a parent and all its subsidiaries. A parent is an entity that has one or more subsidiaries. A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent). Consolidated financial statements must include all subsidiaries of the parent.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly, more than half of the voting power of an entity. Control also exists where the parent owns half or less than half of the voting power of an entity where there is:

(a) Power over more than half of the voting rights by virtue of an agreement with other investors;

(b) Power to govern the financial and operating policies of the entity under a statute or an agreement;

(c) Power to appoint or remove the majority of the members of the board of directors or equivalent governing body;

(d) Power to cast the majority of votes at a meeting of the board of directors or equivalent governing body.