Ind AS 110 Control Assessment for Subsidiaries

Reviewed by Ravi Sisodia · Last reviewed 13 August 2026

Finin2min 2-Minute Summary

• Control exists when an investor has power over the investee, exposure or rights to variable returns from its involvement, and the ability to use power to affect those returns.
• Voting percentage is evidence, not the entire test; contractual rights, dispersed holdings, potential voting rights, relevant activities and decision-making arrangements can change the conclusion.
• Protective rights do not give power merely because they are important; substantive rights and the practical ability to exercise them matter.
• Principal-versus-agent analysis is essential when decision-making authority is delegated to a fund manager, operator or other decision maker.
• The 2026 amendment to Ind AS 110 updates Appendix B paragraph B74 on de facto agents for annual reporting periods beginning on or after 1 April 2026.

Write the control memo around the activities that drive returns

Begin by identifying the investee's purpose and design, then identify the relevant activities that significantly affect returns. Only after that should finance ask who has the current ability to direct those activities. A 51% shareholding often gives power, but less-than-majority voting can also give power when the remaining holdings are dispersed or other arrangements give the investor practical direction rights.

Rights need substance. Options, contractual approval rights and removal rights are considered only to the extent the holder has the practical ability to exercise them when decisions need to be made. A lender covenant designed only to protect the lender from credit deterioration is not automatically a power right.

Link power to variable returns and agency

An investor can have many forms of variable returns: dividends, changes in investment value, fees, synergies, cost savings, residual interests or downside exposure. Ind AS 110 requires a link between power and the ability to affect those returns. The analysis is therefore different from merely showing economic exposure.

When another party makes decisions, assess whether it is a principal or agent. Scope of authority, rights held by others, remuneration and other economic interests matter. The 12 August 2026 amendment also refines the de facto agent guidance: a contractual arrangement is not necessary; the investor, or those directing the investor, may have the ability to direct a party to act on the investor's behalf. That clarification applies for annual reporting periods beginning on or after 1 April 2026.

Worked example: 42% shareholder with dispersed investors

An investor owns 42% of a company. No other shareholder owns more than 2%, historical meetings show low participation, and the investor has consistently been able to appoint key management who direct the relevant activities. Finance should not assume 'below 50% means associate'. The facts may support de facto control. Conversely, a concentrated 58% block held by active unrelated investors could alter the conclusion. The memo must analyse the actual voting pattern and rights.

Control memo checklist

• Document purpose/design and the activities that significantly affect returns.
• Map voting rights, potential voting rights and contractual decision rights.
• Separate substantive rights from protective rights.
• Analyse exposure to variable returns and the power-return linkage.
• Assess delegated decision makers as principal or agent.
• Apply the 2026 B74 de-facto-agent amendment for relevant annual reporting periods.

Questions finance teams commonly ask

Does ownership above 50% always settle control?

It is strong evidence but the full Ind AS 110 control model and any exceptional rights or restrictions still need consideration.

Can ownership below 50% still result in control?

Yes. Dispersed holdings, voting patterns and other substantive rights can give an investor practical power.

What changed in Ind AS 110 in 2026?

G.S.R. 725(E) amended Appendix B paragraph B74 on de facto agents and applies that annual-improvement amendment for annual reporting periods beginning on or after 1 April 2026.

Is a fund manager automatically the principal because it makes investment decisions?

No. Ind AS 110 requires a principal-versus-agent assessment based on authority, rights of others, remuneration and other interests.

Official sources

• ICAI - Ind AS 110 official 2025-26 compendium PDF
• ICAI - Compendium of Indian Accounting Standards 2025-26
• ICAI - notified Ind AS Rules and Companies (Indian Accounting Standards) Amendment Rules, 2026 (G.S.R. 725(E))
• Finin2min Ind AS Hub - broader standard-level reference.

Disclaimer

Educational and professional reference only; confirm the current law, rates and the facts of your case before relying on this page.