Revising for your Strategic Business Reporting (SBR) exam - Part 2 - Share based payment and control assessment

Oct 28, 2026

Revision article for Strategic Business Reporting (SBR) exam Part 2, focusing on common candidate difficulties in assessing whether an acquirer obtains control in business combinations. Explains the inter-related IFRS 10 control criteria—power over the investee, exposure to variable returns, and ability to use power to affect returns—supported by guidance and scenario-based example and suggested answer. Covers share-based payment replacement awards on acquisition and considers how IFRS standards may apply in a pandemic context using Covid-19 as an example.

LanguageEnglish

CategoryExam

FormatPDF

Pages12

Reading Time30 min

AccessFree to download

Introduction

Business combinations

Revision of the basic principles of consolidation

Share based payment – replacement awards on acquisition

The accounting considerations of a pandemic or other natural disaster

Conclusion

Revising for your Strategic Business Reporting (SBR) exam Part 2 The SBR examining team highlight a few areas of the syllabus that have caused candidates problems in recent exams and give some pointers on exam techniques, specific IFRS standards and current issues. Contents Introduction .................................................................. 2 Business combinations ................................................ 3 Revision of the basic principles of consolidation ..... 3 Example.................................................................... 4 Suggested answer.................................................... 4 Guidance .................................................................. 5 Share based payment – replacement awards on acquisition .................................................................... 6 Example.................................................................... 6 Suggested answer.................................................... 7 The accounting considerations of a pandemic or other natural disaster ............................................................ 8 Conclusion ................................................................. 12 Introduction This article is the second in a series which aims to help those SBR candidates who are studying for their exams. Recent examiner reports have stated that SBR candidates often do not provide an effective consideration of whether or not control has been obtained by the acquirer in a business combination. This article therefore identifies the kinds of “control” issues that candidates should be considering when constructing their response to such exam questions. It also reflects upon how sharebased payments should be accounted for when they are made as part of the purchase consideration for a subsidiary in a business combination. Finally, it uses the Covid-19 pandemic as a context within which to consider what IFRS standards might be applicable to reporting entities and why. Business combinations Revision of the basic principles of consolidation When answering SBR exam questions that test control, candidates don’t often focus on the inter-related principles of control despite the fact that the requirement asks them to do so. Control is not simply a matter of owning more than 50% of the voting share capital of an entity and consideration of the individual elements of control in isolation can give rise to the conclusion, incorrectly, that almost any ‘involvement’with another entity creates a controlling relationship. However, it is important to note that the three criteria that define control (considered below) are inter-related and that all three must be present to conclude that the acquirer (investor) has control of the subsidiary. IFRS 10 Consolidated Financial Statements (para 7) states that an investor controlsan investee when the investor has all of the following: i. Power over the investee ii. Exposure, or rights, to variable returns from its involvement with the investee; and iii. The ability to use its power over the investee to affect the amount of the investors returns The following table considers each of the control criteria and identifies issues that candidates need to apply to the SBR exam question scenario to identify whether (or not) control has been transferred to the acquirer: | Control
criteria
(IFRS
10) | Considerations to apply to the SBR exam question scenario: | | --- | --- | | Power over the
investee | • owning a majority of the voting rights is not always necessary to have control. Instead, control requires that the investor’s
power/rights are sufficient for it to unilaterally direct the relevant activities that most affect the investee’s returns. For example, SBR candidates should consider who makes the operating, financing and capital decisions, and who appoints key management personnel.
• more analysis and judgement is required to determine wh

FAQs

What are the three inter-related criteria for control under IFRS 10?

IFRS 10 requires: (1) power over the investee, (2) exposure or rights to variable returns, and (3) the ability to use power to affect the amount of returns.

Why is owning more than 50% of voting rights not always enough to conclude control?

Control depends on whether the investor’s power/rights are sufficient to unilaterally direct the relevant activities that most affect returns; a significant minority can still imply control depending on rights and practical direction of activities.

How should share-based payments be considered in a business combination purchase consideration?

The article highlights that share-based payments, specifically replacement awards on acquisition, require accounting treatment as part of the purchase consideration for a subsidiary in the business combination.

Oct 28, 2026

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