Last reviewed: July 2026.
Group Accounting Definitions: Control, NCI and Associates clarifies the core terms used to decide whether an investment is consolidated, equity-accounted or presented under another standard.
Parent, subsidiary and group
A parent is an entity that controls one or more entities. A subsidiary is an entity controlled by another entity, and the parent together with its subsidiaries forms a group. Consolidated financial statements present the group’s assets, liabilities, equity, income, expenses and cash flows as those of a single economic entity.
The three elements of control
IFRS 10 requires power over the investee, exposure or rights to variable returns, and the ability to use power to affect those returns. All three elements must be present. Ownership percentage is important evidence but is not the only factor, especially when voting rights are dispersed or contractual arrangements direct relevant activities.
Power and relevant activities
Power arises from existing rights that give the current ability to direct activities that significantly affect returns. Relevant activities may include selling goods, selecting assets, managing financial assets, approving budgets or appointing key management. The assessment focuses on substantive rights that can be exercised when decisions need to be made.
Variable returns and the link to power
Returns can be positive, negative or both and may include dividends, changes in investment value, fees, synergies, access to resources or exposure to losses. An investor controls only when it can use its power to influence those returns. Acting as an agent for another party does not create control for the agent.
Non-controlling interests
Non-controlling interest is the equity in a subsidiary not attributable directly or indirectly to the parent. NCI is presented within equity in consolidated financial statements, separately from owners of the parent. Profit or loss and other comprehensive income are allocated between the parent and NCI even if this creates a deficit balance for NCI.
Consolidated and separate financial statements
Consolidated statements combine the parent and subsidiaries and eliminate intra-group balances and transactions. Separate financial statements account for investments in subsidiaries, associates and joint ventures under the options permitted by IAS 27. The same investment can therefore appear differently in consolidated and separate reporting.
Associate and significant influence
An associate is an entity over which the investor has significant influence but not control or joint control. Significant influence is the power to participate in financial and operating policy decisions. Holding 20% or more of voting power creates a presumption of significant influence unless clearly rebutted, while a lower holding may still provide influence.
Joint arrangements
Joint control exists when decisions about relevant activities require unanimous consent of the parties sharing control. A joint operation gives parties rights to assets and obligations for liabilities, while a joint venture gives rights to net assets. Classification depends on rights and obligations, not merely the legal form.
Protective and substantive rights
Protective rights safeguard the holder without giving power, such as a lender’s right to restrict major changes after default. Substantive rights provide practical ability to direct relevant activities. Barriers, exercise price, timing and the holder’s capacity must be considered when deciding whether rights are substantive.
Changes in ownership and control
Acquiring control triggers business-combination or asset-acquisition analysis. Losing control requires derecognition of the subsidiary’s assets, liabilities and NCI, with any retained interest remeasured as required. Changes in ownership that do not result in loss of control are generally accounted for as equity transactions in consolidated statements.
Structured entities and practical assessment
Control can exist even when voting rights are not the dominant factor, such as in structured entities whose relevant activities are directed through contractual arrangements. Assess the purpose and design, decision-making rights, exposure to variability and whether another party is acting as principal or agent. Document significant judgements and reassess them when arrangements change.
Disclosure and judgement
IFRS 12 requires information that helps users understand interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. Where control or significant influence is judgemental, disclose the key assumptions and facts. Maintain an ownership chart, voting analysis, agreements and board-rights summary so the conclusion can be reviewed and updated.
Practical review checklist
- Assess control using power, variable returns and the ability to link them.
- Distinguish substantive decision rights from protective rights.
- Present NCI separately within consolidated equity.
- Use significant influence, not ownership percentage alone, for associates.
- Reassess control when facts, rights or decision-making arrangements change.
Worked example
Investor A owns 48% of Entity B, while thousands of other shareholders each hold less than 1% and historically do not organise to vote together. A appoints most directors and directs the activities that significantly affect returns. The facts may support control despite ownership below 50%. By contrast, a 25% holding with board representation but no control may be an associate accounted for under IAS 28.
Related Accounting Support guides
Continue with the group accounts requirements guide, parent undertaking and control guide, and the participating interest guide.
Authoritative references
Authoritative references: IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures.
Key takeaway
Group accounting starts with definitions. Control determines consolidation, significant influence points to associate accounting, joint control identifies joint arrangements, and NCI represents the equity of subsidiary owners outside the parent. Each conclusion must reflect current rights and facts.