IFRS 10 — Investment entity consolidation

Date recorded:

Investment entity consolidation - Agenda Paper 8A


In November 2016 the Interpretations Committee considered a request regarding the assessment of whether an investment entity that has subsidiaries (i.e. a parent investment entity) should consolidate a subsidiary in terms of IFRS 10.32 in specified circumstances. The submitter asked the following questions:

  • (a) Would a subsidiary qualify as an investment entity (IE) if it possessed all three elements described in IFRS 10.27, but did not have all of the typical characteristics of an investment entity listed in IFRS 10.28?
  • (b) Would a subsidiary be considered as providing investment management services to investors per IFRS 10.27(a) if it outsourced the provision of these services to a third party?
  • (c) Would a subsidiary be considered as providing services that related to the parent’s investment activities per IFRS 10.32 if it held an investment portfolio as beneficial owner and had no other activity?
  • (d) To what extent could an investment entity provide investment-related services, itself or through a subsidiary, to third parties?

The Committee decided to issue draft decision not to add this issue to its agenda, on grounds that the existing guidance in IFRS 10 was adequate to address the issue.

Staff analysis on comment letters received

The Committee received three comment letters, of which two supported the tentative decision. One comment letter, from the Swiss Association of Investment Companies, expressed concerns about wholly owned subsidiaries being classified as investment entities. The letter suggested that in such cases simply having the three elements in IFRS 10.27 should not in of itself lead be sufficient to conclude that the subsidiary is an investment entity. In such cases the parent and subsidiary should be considered together and more emphasis should be placed on the characteristics in IFRS 10.28. The Regulatory Board of the Swiss Stock Exchange has issued supplementary disclosure requirements to remedy what it sees as a deficiency in the information about the assets and liabilities of the subsidiary.

The staff analysis suggests that many of these matters were considered by the IASB when it developed the investment entity exception in IFRS 10. That Standard is also scheduled to undergo a post-implementation review, and this type of concern would be more appropriately considered is part of that broader review.

Staff recommendation

The Staff recommended that the Committee finalise the agenda decision.


The IC agreed to finalise the agenda decision subject to drafting changes without any significant discussion.

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