IFRS 10 — Investment entity consolidation

Date recorded:

IFRS 10 Consolidated Financial Statements - Investment Entities — Consolidation of subsidiaries - Agenda paper 5


This was a new item. The IC received a request regarding the assessment of whether an investment entity that has subsidiaries (i.e. a parent investment entity (PIE)) consolidates a subsidiary in terms of IFRS 10.32 in specified circumstances. The submitter asked the following questions:

  1. Does a subsidiary qualify as an investment entity (IE) if it possesses all three elements described in IFRS 10.27, but does not have all of the typical characteristics of an investment entity listed in IFRS 10.28?
  2. Is a subsidiary considered as providing investment management services to investors per IFRS 10.27(a) if it outsources the provision of these services to a third party?
  3. Is a subsidiary considered as providing services that relate to the PIE’s investment activities per IFRS 10.32 if it holds an investment portfolio as beneficial owner and has no other activity?
  4. To what extent can an investment entity provide investment-related services, itself or through a subsidiary, to third parties?

Staff analysis

  1. IFRS10.28 explicitly states that the absence of any of the typical characteristics does not necessarily disqualify an entity from being an IE. In addition, IFRS10.B85A emphasises that an entity that possesses the three elements described in IFRS 10.27 is an IE.
  2. The Staff believes that a subsidiary is considered as providing investors with investment management services even if it outsources the performance of these services to a third party. This is because IFRS 10 does not specify how the IE must provide these services, and does not preclude it from outsourcing these services to a third party.
  3. The Staff notes that the IC has issued an agenda decision in March 2014 noting that a subsidiary is not considered as providing investment-related services or activities if the subsidiary holds investments for tax optimisation purposes and there is no activity within the subsidiary. This should be applied similarly to the case at hand.
  4. IFRS 10.85C states that an IE may provide investment-related services even if those activities are substantial to the entity, subject to the entity continuing to meet the definition of an IE. Accordingly, the Staff believes that an IE may provide investment-related services subject to those services being ancillary to the IE’s core investing activities, and does not change the business purpose of the entity from investing per IFRS 10.27(b) to providing investment-related services.

Staff recommendation

The Staff recommended that the IC not add this issue to its agenda, on grounds that the existing guidance in IFRS 10 is adequate to address the issue.


The IC approved the Staff’s recommendation, subject to redrafting the agenda decision to reflect more of the Staff’s analysis provided in the agenda paper, as well as addressing the definition of an IE in the context of all entities and not just for subsidiaries.

Correction list for hyphenation

These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.