Explain the difference between de facto control and de jure control over another company. How should it be determined which company should consolidate the controlled company in the case in which one investor [company X] has a majority ownership of the investee [company Z], but a third party [company Y] has de facto control of Z? Do both X and Y consolidate Z?
Solution
De facto control on a company means when the investor is able to exercise powers over the investee with out having majority of shares in the investee.
De jure control is the control where an investor exercises over the investee by virtue of his share holding in the investee.
Company X had De jure control over the Company Z. Legally Company X should consolidate its financial statments with that of the subsidiary unless any one of the two exceptions as stated in IFRS 10.
As Company Z has De facto control over the company Z, as stated in IFRS 10, then it should also consolidate.
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Explain the difference between de facto control and de jure control ov.docx
1. Explain the difference between de facto control and de jure control over another company. How
should it be determined which company should consolidate the controlled company in the case in
which one investor [company X] has a majority ownership of the investee [company Z], but a
third party [company Y] has de facto control of Z? Do both X and Y consolidate Z?
Solution
De facto control on a company means when the investor is able to exercise powers over the
investee with out having majority of shares in the investee.
De jure control is the control where an investor exercises over the investee by virtue of his share
holding in the investee.
Company X had De jure control over the Company Z. Legally Company X should consolidate its
financial statments with that of the subsidiary unless any one of the two exceptions as stated in
IFRS 10.
As Company Z has De facto control over the company Z, as stated in IFRS 10, then it should
also consolidate.
![Explain the difference between de facto control and de jure control over another company. How
should it be determined which company should consolidate the controlled company in the case in
which one investor [company X] has a majority ownership of the investee [company Z], but a
third party [company Y] has de facto control of Z? Do both X and Y consolidate Z?
Solution
De facto control on a company means when the investor is able to exercise powers over the
investee with out having majority of shares in the investee.
De jure control is the control where an investor exercises over the investee by virtue of his share
holding in the investee.
Company X had De jure control over the Company Z. Legally Company X should consolidate its
financial statments with that of the subsidiary unless any one of the two exceptions as stated in
IFRS 10.
As Company Z has De facto control over the company Z, as stated in IFRS 10, then it should
also consolidate.](https://image.slidesharecdn.com/explainthedifferencebetweendefactocontrolanddejurecontrolov-230126202902-13c02457/85/Explain-the-difference-between-de-facto-control-and-de-jure-control-ov-docx-1-320.jpg)
