Consolidated and Separate Financial Statements: Aligning SMEs with IFRS 10

The 2025 edition of the IFRS for SMEs Accounting Standard introduces significant updates to Section 9: Consolidated and Separate Financial Statements. These revisions are designed to align the concept of control with IFRS 10 Consolidated Financial Statements while maintaining the simplified framework suitable for SMEs.

For many small and medium-sized entities, understanding when and how to prepare consolidated financial statements can be challenging—particularly in group structures, joint ventures, or investment arrangements. The new changes aim to remove ambiguity and provide clearer guidance.

What’s Changed in Section 9?

The IASB’s revision focuses on improving consistency between the SME framework and full IFRS. Here are the key updates:

1. Definition of Control Aligned with IFRS 10

• The revised definition emphasizes that an investor controls an investee when it has:

  • Power over the investee

  • Exposure or rights to variable returns

  • Ability to use power to affect returns

This is a principles-based definition, providing clarity on when consolidation is required.

2. Rebuttable Presumption Retained and Clarified

• The presumption that an investor controls an investee when it holds a majority of voting rights remains in place.

• However, the revised standard clarifies that control can exist even without majority ownership, such as when contractual rights or arrangements give an investor dominant influence.

3. Practical Impact for SMEs

• SMEs with subsidiaries, structured entities, or special purpose vehicles need to revisit their group reporting policies.

• Determining whether consolidation is required will now depend on the substance of relationships, not just ownership percentages.

Why These Changes Matter

• Greater Transparency: Users of financial statements gain a clearer picture of an SME’s economic resources and obligations.

• Better Alignment: SMEs can now transition more smoothly to full IFRS if needed.

• Risk Mitigation: Proper application avoids non-compliance penalties and audit complications.

Transition and Effective Date

The new rules apply to annual reporting periods beginning on or after 1 January 2027, with retrospective application under Section 10. Transition relief options exist to ease the adoption process.

How Dawgen Global Can Help

Transitioning to the revised consolidation requirements may seem complex, but Dawgen Global provides end-to-end support to make it seamless:

✅ Group Structure Analysis

We assess your entity structure to determine control relationships under the new definition. This includes reviewing ownership rights, contractual arrangements, and governance provisions to ensure compliance.

✅ Preparation of Consolidated Financial Statements

Our team assists in:

• Combining financial information from multiple entities

• Eliminating intra-group balances and transactions

• Preparing adjustment entries for non-controlling interests and equity

✅ Policy and Process Updates

We help you implement updated consolidation policies and internal controls aligned with the revised Section 9 requirements.

✅ Training and Knowledge Transfer

Our customized training ensures your finance team understands:

• When consolidation is required

• How to apply the new control definition

• Best practices for separate financial statements

✅ Continuous Compliance Support

We provide ongoing advisory and audit readiness services, helping SMEs maintain compliance and adapt to future IFRS revisions.

Why Dawgen Global?

As a trusted advisory firm in the Caribbean, Dawgen Global combines global IFRS expertise with local SME insights, ensuring compliance is achieved efficiently and cost-effectively.

Call to Action

📌 Start preparing today to meet the 2027 deadline with confidence. Partner with Dawgen Global for expert IFRS implementation support.

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