On Page 90 of the Annual report (in the Final Column) under IFRS10 it talks about a ?model for Consolidation?. Can you explain what this means please? Should it matter to me?

I need a detailed answer with 2-3 pages including definition, advantages and disadvantages, explaning about subsidiries, joint ventures, associaates. accoring to the adv and disadv. when do we need ifrs 10 when not.

Group Accounting Some definitions for the purpose of group accounting Subsidiary An entity controlled by another entity (Parent) Which has the power to control the financial and operating policies of the subsidiary So as to obtain benefits from its operations Associate An entity in which an investor exercises significant control (eg less than 30% shareholding) Without overall control An Investment An entity in which an investor does not exercise significant control or influence (e.g. 10% shareholding) The requirement for Consolidated Accounts If a Group did not include the accounts of its subsidiaries in one set of consolidated statements then: It might not be possible to assess the economic performance of the group as a whole properly The parent's balance would just show the subsidiary as an investment And just the dividend income would appear in the income statement The requirement for Consolidated Accounts This could lead to a misleading statement: For example the subsidiary could borrow large amounts of cash without it showing in the parent's balance sheet (like Enron) Or arrange large lease contracts without them showing on the parent company's balance sheet Deciding which entities to consolidate Subsidiaries should be consolidated but not Associates but not always straightforward to distinguish between an Associate and a subsidiary Different countries may have different views on just what stipulates 'control' Relationships are not always clear cut (see exercise) Example of Consolidation Large Group - Unconsolidated Large Company () Small Company () Non Current Assets 180,000 104,000 Investment in Small Co 250,000* - 40,000 30,000 470,000 134,000 300,000 100,000 170,000 34,000 470,000 134,000 Current Assets 1 Ordinary Shares Reserves *100% of Small's issued share capital @ 2.5/share Example of Consolidation Large Group - Consolidated Non current assets Current Assets Goodwill on Consolidation 284,000 70,000 116,000 470,000 1 Ordinary Shares Reserves 300,000 170,000 470,000