Consolidation Standards IFRS 10 A critical look Consolidation

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Consolidation Standards IFRS 10 A critical look

Consolidation Standards IFRS 10 A critical look

Consolidation Standards How do we consolidate? & When do we consolidate?

Consolidation Standards How do we consolidate? & When do we consolidate?

Consolidation Standards A historical perspective

Consolidation Standards A historical perspective

Evolution of Consolidation Standards 1976 - IAS 3: Majority Share holding 1989 - IAS

Evolution of Consolidation Standards 1976 - IAS 3: Majority Share holding 1989 - IAS 27: Control (Power to govern) 2003 - SIC 12: Risk & Reward 2013 - IFRS 10: Power+Exposure+Ability

Evolution of Consolidation Standards Phase 1 (1976 -89) IAS 3 Consolidated Financial Statements Criteria

Evolution of Consolidation Standards Phase 1 (1976 -89) IAS 3 Consolidated Financial Statements Criteria for consolidation: Majority Share holding (≥ 51%)

Evolution of Consolidation Standards Reasons for moving from Phase 1 to Phase 2: Ø

Evolution of Consolidation Standards Reasons for moving from Phase 1 to Phase 2: Ø Deregulation & “free for all” attitude Ø Financial engineering & creative accounting Ø Proliferation of Investment Banking, Private Equity Firms, Venture Capita Funds , etc.

Evolution of Consolidation Standards Phase 2 (1989 -2003) IAS 27 Consolidated Financial Statements Criteria

Evolution of Consolidation Standards Phase 2 (1989 -2003) IAS 27 Consolidated Financial Statements Criteria for consolidation: Control (Power to govern)

Evolution of Consolidation Standards Reasons for moving from Phase 2 to Phase 3: Enron

Evolution of Consolidation Standards Reasons for moving from Phase 2 to Phase 3: Enron Scandal (2001) Abuse of Special Purpose Vehicles

Evolution of Consolidation Standards Phase 3 (2003 -2008) SIC 12 Consolidation - Special Purpose

Evolution of Consolidation Standards Phase 3 (2003 -2008) SIC 12 Consolidation - Special Purpose Entities Criteria for consolidation: Risk & Reward

On the Other Side (2002 - 08) Reasons for moving from Phase 3 to

On the Other Side (2002 - 08) Reasons for moving from Phase 3 to Phase 4: Ø Corporate greed & Regulator’s apathy Ø Sub prime mortgage Ø Bearsterns & Lehman Brothers Ø Domino effect & global crisis

Evolution of Consolidation Standards Phase 4 (Since 2013 ) IFRS 10 Consolidated Financial Statements

Evolution of Consolidation Standards Phase 4 (Since 2013 ) IFRS 10 Consolidated Financial Statements Criteria for consolidation: PEA Power, Exposure & Ability

Phases - Recap Phase 1 - 1976 - IAS 3: Majority Share holding Phase

Phases - Recap Phase 1 - 1976 - IAS 3: Majority Share holding Phase 2 - 1989 – IAS 27: Control (Power to govern) Phase 3 - 2003 - SIC 12: Risk & Reward Phase 4 - 2013 - IFRS 10: PEA

May sanity prevail! “Insanity is doing the same thing in the same way again

May sanity prevail! “Insanity is doing the same thing in the same way again and expecting different results” - Anon.

Standard setting Needs A New Thinking Hat!

Standard setting Needs A New Thinking Hat!

The Remedies • • • Effective corporate governance Compensation scrutiny Continual risk assessment Regulating

The Remedies • • • Effective corporate governance Compensation scrutiny Continual risk assessment Regulating Derivative Trading Whistle – blower protection

The Need of the hour Paradigm shift in measuring corporate success “Not Just Short

The Need of the hour Paradigm shift in measuring corporate success “Not Just Short term profits But Long term stability”

Thank you Questions Please. - James Ravi FCA, CPA

Thank you Questions Please. - James Ravi FCA, CPA