IPSAS 35
Active
Consolidated Financial Statements
Establishes principles for presenting and preparing consolidated financial statements when a public-sector entity controls one or more other entities – including the three-element control test, non-controlling interests, changes in ownership, loss of control, the investment-entity exception, and a public-sector 'combinations carve-out'. Effective 1 January 2017. (IFRS 10 equivalent.) Disclosure of interests in other entities is deferred to IPSAS 38.
Active Standard
IPSAS 35 Consolidated Financial Statements is the current, active standard issued by the IPSASB for presenting and preparing consolidated financial statements when a public-sector entity controls one or more other entities. Effective for periods beginning on or after 1 January 2017 (earlier application encouraged). Paras. 1–78.
IPSAS 35 is the IPSASB's adaptation of IFRS 10 Consolidated Financial Statements for the public sector – keeping the IFRS 10 control model but adding public-sector nuances (the 'service potential' benefit concept, the public-sector combinations carve-out, and explicit 'control' commentary for grantor entities).
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Objective, Scope & the Public Sector Combinations Carve-Out (paras. 1–6)
Objective & scope (para. 1)
Establishes principles for presenting and preparing consolidated financial statements when a public-sector entity controls one or more other entities. Scope covers all entities the reporting entity controls – the combination carve-out (IPSAS 40) is excluded and applied separately.
Key definitions
Control
The power to govern the financial and operating policies of an entity so as to obtain benefits.
Reporting entity
A public-sector entity and the entities it controls, as a single economic entity for reporting.
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Presentation of Consolidated Financial Statements – the Consolidation Exemption (paras. 5, 7, 9–10)
When to exempt (para. 5)
A wholly-owned subsidiary (or a primarily-financing, non-trading or intermediate entity) may be excluded from consolidation if the parent demonstrates it has nothing more to consolidate than an investment in the entity and presents that investment at fair value. The exemption applies only if all of the criteria are met.
The exemption is the same economic principle as IFRS 10 but with IPSAS public-sector framing of 'service potential'.
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Definitions (para. 14)
Core terms (para. 14)
TermMeaning
Controlled entityEntity over which the parent has control
Non-controlling interestPart of equity in a subsidiary not attributable to the parent
ControlPowerReturnsNon-controlling interest
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Control – the Three-Element Test (paras. 18–22)
The IFRS 10 test (para. 18)
Control exists when the entity has: (1) POWER over the investee (exercised relevantly); (2) EXPOSURE to VARIABLE RETURNS from involvement; and (3) the ABILITY to use power to affect those returns. All three must hold.
PowerPotential voting rightsReturns (variable)Use power to affect returns
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Power – Rights & Public Sector Nuances (paras. 23–29)
Public-sector power (para. 23)
Power comes from rights (voting or substantive), from the ability to direct key decisions, or from the terms of the arrangement. IPSAS adds commentary on public-sector grantor arrangements and where 'power' is exercised through statutory delegation rather than shareholding.
For government grantors, evaluate whether substantive removal rights are held even absent a majority stake.
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Benefits – Financial & Non-Financial (paras. 30–34)
What returns? (para. 30)
Returns may be financial (dividends, interest) OR non-financial – for the public sector, the 'benefit' is often the delivery of public services, the maintenance of an asset, or the achievement of policy outcomes. The public sector combinations carve-out (IPSAS 40) interacts here.
Return typePublic-sector example
FinancialDividends, interest on loan
Non-financialPublic service delivery, asset upkeep
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Link Between Power and Benefits – Principal vs Agent (paras. 35–37)
Principal vs agent (para. 35)
An entity that controls the investor-side risk (principal) recognises the acquisition-related transaction in its own books; an agent-like participant (no control) recognises only the income element. The principal/agent determination drives recognition of pre-acquisition revenue.
IPSAS 35 keeps IFRS 10's substance-over-form approach but adds public-sector examples.
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Accounting Requirements & Consolidation Procedures (paras. 38–41)
Consolidate (para. 38)
The reporting entity must consolidate all entities it controls: (1) at acquisition date, recognise acquired assets/liabilities at FV; (2) eliminate intra-group items; (3) translate foreign operations; (4) assess goodwill for impairment.
Control assessmentFV at acquisitionEliminate intra-groupGoodwill impairment test
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Measurement Timing, Reporting Dates & Potential Voting Rights (paras. 42–46)
Timing rules (para. 42)
Potential voting rights are assessed at each reporting date, not just acquisition. Consolidation is measured at the reporting date – including changes in control mid-period, which trigger a new acquisition-date measurement.
A change in control is accounted for separately from the continuing acquiree – gains/losses recognised in profit or loss.
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Non-Controlling Interests (paras. 47–50)
NCI choices (para. 47)
OptionTreatment
GVPTM (equity)Cost of NCI – part of equity
FVOCI/GVOP (P&L)NCI measured at FV – in profit or loss
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Changes in the Proportion Held by Non-Controlling Interests
Second purchase (para. 51)
When the parent (already controlling) transacts with non-controlling owners for additional interests, the transaction is treated as an equity transaction – the consideration is added to/netted against equity, with NO gain or loss recognised.
Proportional PI
Additional acquisition of non-controlling interest – equity, not P&L.
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Loss of Control – Derecognition & Gain/Loss Mechanics
Partial disposal (para. 52)
A loss of control is accounted for as a DERECOGNITION of the entity – any gain/loss is the difference between proceeds, carrying amount of the residual interest, and any deferred/contingent consideration. NCI is re-measured to FV.
Full gain/loss on sale of control goes to profit or loss; the carve-out rules of IPSAS 40 may overlay for public-sector combinations.
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Investment Entities – the Fair Value Exception & Status Changes
FV through equity (para. 56)
SituationTreatment
Investment-entity subsidiaryMeasured at FVOCI
Loses investment-entity statusRe-measure to cost model
IPSAS 34 holds the corresponding separate-statements counterpart; IPSAS 36 covers the equity-method associates.
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Worked Scenarios – Power & Control Assessment Judgment
Judgment guide (IE2–IE6)
IPSAS 35 includes illustrative examples judging when control exists: (1) variable returns + power; (2) power alone (voting + board); (3) exposure without power (agent); (4) joint control edge-case; (5) structured entity with no power. Each tests the three elements.
Power + returns + use of powerSolo controlPower absent → agentJoint control → IPSAS 37
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Disclosure – Deferred Entirely to IPSAS 38
Deferral (para. 65)
IPSAS 35 itself requires NO disclosure – ALL disclosure relating to interests in controlled entities, non-controlling interests, structured entities and the composition of the group is DEFERRED to IPSAS 38 (which also covers associates and joint arrangements).
This is a public-sector streamlining: consolidation is consolidated with the 38 disclosure set.
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Transitional Provisions, Effective Date & Amendment Timeline (paras. 65–81)
Timeline
DateEvent
Jan 2015Issued
1 Jan 2017Effective date
2026Amended (latest)
Transition: apply retrospectively as a modified retrosspective (no separate opening SOFP required where IFRS 10 transition applies).
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Relationship to IFRS 10
Mapping (para. 78)
IPSAS 35 tracks IFRS 10's control model (three elements, VIEs/subos, principal/agent) but adds public-sector commentary, the combinations carve-out interaction and the wholesale deferral of disclosure to IPSAS 38.
IFRS 10 control testIPSAS 35 same + carve-outIFRS 10 NCIIPSAS 35 same (GVPTM/GVOP)IFRS 10 disclosureIPSAS 38 takes it
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Statement / Process Mapping
Where it flows
ProcessLedger
Control assessmentGovernance → Control Matrix
Consolidation runConsol Engine → elim intercompany
NCI movementEquity Roll / NCI Module
DisclosureDefer to IPSAS 38 engine
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Related Standards – Cross-Reference Map
See also
StandardRelation
IPSAS 34Separate statements
IPSAS 36Equity-method associates/JVs
IPSAS 37Joint arrangements
IPSAS 38Disclosure of interests in entities
IPSAS 40Public sector combinations
IFRS 10Direct equivalent
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Quick-Reference Glossary
Control
Power + variable returns + ability to use power.
Non-controlling interest
Portion of subsidiary equity not attributable to parent.
Principal vs agent
Principal bears investor-side risk; agent does not.
Investment entity
Holds investments for capital appreciation; FV exception.
Loss of control
Derecognition event; gain/loss to P&L.
Combinations carve-out
IPSAS 40 interaction with public-sector combinations.