Need to Know: IFRS 10 - Consolidated Financial ... - BDO Canada

36 IFRS 10 Consolidated Financial Statements7.5.2. De facto agentsAn investor is required to combine its rights and the rights of a de facto agent when it assesses whether it controls aninvestee. A de facto agent is described as a party that is acting on the investor’s behalf.IFRS 10 acknowledges that this determination of a de facto agent is judgemental and that the relationship betweenthe investor and the parties and also how the parties interact with each other and the investor is required to be takeninto consideration (IFRS 10.B73).Such a relationship does not necessarily need a contractual arrangement. A party is a de facto agent when theinvestor has the ability to direct that party to act on the investor’s behalf (IFRS 10.B74).IFRS 10.B75 provides a list of examples of parties that might act as de facto agents:––The investor’s related parties––A party that received its interest in the investee as a contribution or loan from the investor––A party that has agreed not to sell, transfer or encumber its interests in the investee without the investor’s priorapproval (except for situations in which the investor and the other party have the right of prior approval and therights are based on mutually agreed terms by willing independent parties)––A party that cannot finance its operations without subordinated financial support from the investor––An investee for which the majority of the members of its governing body or for which its key managementpersonnel are the same as those of the investor––A party that has a close business relationship with the investor, such as the relationship between a professionalservice provider and one of its significant clients.This guidance is not intended to imply that the parties listed above always act for the investor. When assessingwhether a party acts as de facto agent judgement, including careful consideration of the nature of the relationshipand the way that the parties interact with each other, will be required.