IFRS 10 Consolidated Financial Statements requires the allocation of profit to non-controlling interests even if the allocation would result in a debit balance of non-controlling interests. This requirement is different from IAS 27 (2003) Consolidated and Separate Financial Statements, which requires the majority interests to absorb the losses that exceed the then “minority interests.” IAS 27 (2003) does permit an exception: if the “minority interests” have a binding obligation and is able to make an additional investment to make good the losses, the majority interests do not need to absorb the losses covered by the obligation.

Required:
1. Read the Basis of Conclusions in IFRS 10 and analyze the explanations given by the Board on their final decision. (Most University Libraries would have a database that would permit you to access the Basis of Conclusions of the IFRS Standards.)
2. When losses exceed the balance in non-controlling interests, which of the following treatment would you support. Write a 500-word short essay to explain your decision.

(a) IFRS 10.

(b) IAS 27 (2003); or

(c) Other treatment (specify).
3. Role play and class debate: Your professor will organize you into two groups. One group represents the board members in the Board that supports the position in IFRS 10, and the other group supports the position in IAS 27 (2003). Each group is given ten minutes to make its case. The professor and other class members will be the judge to decide which group has the most convincing arguments.