Anvendelse af IFRS 10 i den finansielle sektor: En analyse af nødlidende selskabers effekt på bankernes regnskaber

Alex Blicher Hansen

Student thesis: Master thesis


As a consequence of the financial crisis, there was a demand for greater transparency of the risks that a company is exposed to, contained within its financial statements. One of the responses to this demand was the establishment of IFRS 10 Consolidated Financial Statements, which outlines the requirements for the preparation and presentation of consolidated financial statements. It was issued in May 2011, and applies to annual periods beginning on or after 1 January 2013 (1 January 2014 in Denmark). Among others, the standard superseded SIC-12 Consolidation – Special Purpose Entities. The purpose of this Master’s thesis is to outline the requirements when applying IFRS 10 in the financial sector, with a focus on ailing companies’ effects on banking institutions’ financial statements, when the bank has a loan agreement with that company. IFRS establishes the basis for control for an investor through exposure or rights to variable returns over an investee; and the ability to affect those returns through power over said investee. When carrying out a control assessment all facts and circumstances should be considered. This includes voting rights or other rights that gives the investor the possibility to dictate the relevant activities, which means that even potential voting rights should be included in the assessment. As a consequence, banks can through their loan agreements, obtain substantive rights in the form of potential voting rights (e.g. pledged shares) that lead to the bank gaining control over the ailing company. If such control is gained the ailing company should be included in the consolidated financial statements. When carrying out an analysis of the effect that such ailing companies potentially have on the consolidated financial statements, it becomes clear that the consequence is comprehensive. The consolidation results in the financial statements being affected in a negative and undesirable way, as the key figures will include the ailing company’s figures, which are generally characterized by adverse performance, and can also lead to extra line items being included in the financial statements. Whether the extra information that will be included in the financial statements is in accordance with the stakeholder’s information needs may be questioned. Not only will the view of the bank’s performance be altered, but the possibility to derive the actual banking business from the information will be difficult, while the comparability will also be challenged. The effect on the bank internally is also a parameter that should be considered. Obtaining the necessary information to be able to carry out the consolidation is both difficult and costly for the bank. As such, it could be questioned whether or not the standard causes a number of inconsistencies for the financial report of banking institutions, and if these could result in the true and fair view of the standard being challenged. When presenting the issue for the Danish Financial Supervisory Authority and other relevant parts it is clear that the area is yet to be explored, and that there is currently no official views on this subject.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
Publication date2015
Number of pages95