IFRS 10 Consolidated Financial Statements: Effect of Protective rights on an assessment of control
In August 2012, the IFRS Interpretations Committee ('the Interpretations Committee') received a request for clarification about IFRS 10 Consolidated Financial Statements. IFRS 10 defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. An important element of control in IFRS 10 is power. The submission relates to protective rights, and the effect of those rights on power over the investee, as outlined in a simple example when a borrowing covenant is breached.