{"id":241,"date":"2026-06-15T22:05:09","date_gmt":"2026-06-15T13:05:09","guid":{"rendered":"https:\/\/gaap-bridge.com\/?p=241"},"modified":"2026-06-15T22:05:09","modified_gmt":"2026-06-15T13:05:09","slug":"spc-04-who-really-controls-the-spc","status":"publish","type":"post","link":"https:\/\/gaap-bridge.com\/?p=241","title":{"rendered":"SPC 04 &#8211; Who Really Controls the SPC?"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Understanding Control Under IFRS 10<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Hello everyone, Global CPA here ??<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the previous article, we discussed one of the most important questions in structured finance:<\/p>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-7387b849 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\" style=\"flex-basis:100%\">\n<pre class=\"wp-block-verse\"><span style=\"text-decoration: underline\">Does a transfer qualify as a True Sale?<\/span><\/pre>\n<\/div>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\">However, even if a transaction passes the True Sale test, another critical question remains:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span style=\"text-decoration: underline\">Who actually controls the SPC?<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This question is important because control determines whether the SPC must be consolidated under IFRS 10.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And if consolidation is required, the assets and liabilities inside the SPC may ultimately reappear in the group&#8217;s consolidated financial statements.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>1. The Common Misunderstanding<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Many people assume that the following structure automatically removes assets from the consolidated balance sheet.<\/p>\n\n\n\n<figure data-spectra-id=\"spectra-edd94b24-d8c1-49ef-829f-f9dab2cba267\" class=\"wp-block-image size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1536\" height=\"1024\" src=\"https:\/\/gaap-bridge.com\/wp-content\/uploads\/2026\/06\/spc03.png?w=1024\" alt=\"\" class=\"wp-image-237\" \/><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The logic appears straightforward:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>ABC Corp. transfers the property into a trust structure.<\/li>\n\n\n\n<li>The beneficial interest is transferred to DEF Fund.<\/li>\n\n\n\n<li>External investors participate through preferred units.<\/li>\n\n\n\n<li>The SPC becomes a legally separate entity.<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\">At first glance, it appears that ABC Corp. no longer owns the asset.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, IFRS 10 asks a different question.<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Who has control over the relevant activities of the SPC?<\/p>\n<\/blockquote>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">2. Legal Ownership Is Not the Same as Control<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">One of the core principles of IFRS 10 is that legal ownership alone does not determine consolidation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Instead, control exists when an investor has:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1) Power<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The ability to direct relevant activities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2) Exposure to Variable Returns<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The ability to benefit from or suffer from the performance of the SPC.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3) <strong>Linkage<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The ability to use that power to affect those returns.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">All three conditions must be considered together.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">Step 1 &#8211; Who Has Power?<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">The first question is:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Who makes the important decisions?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Examples include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Sale of the property<\/li>\n\n\n\n<li>Refinancing decisions<\/li>\n\n\n\n<li>Tenant selection<\/li>\n\n\n\n<li>Asset management strategy<\/li>\n\n\n\n<li>Disposal timing<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In many SPC structures, legal ownership may sit with a trustee.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, if ABC Corp. effectively directs these decisions, power may still remain with the sponsor.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is often the first warning sign for consolidation.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">Step 2 &#8211; Who Bears the Upside and Downside?<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Next, IFRS examines economic exposure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Looking at our structure:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Senior lenders receive fixed interest.<\/li>\n\n\n\n<li>Preferred investors receive a target return.<\/li>\n\n\n\n<li>ABC Corp. holds common units and residual interests.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This is important because residual interests usually absorb:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Remaining profits<\/li>\n\n\n\n<li>Remaining losses<\/li>\n\n\n\n<li>Property appreciation<\/li>\n\n\n\n<li>Property depreciation<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In other words:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">ABC Corp. may still be exposed to the majority of variable returns.<\/p>\n<\/blockquote>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">Step 3 &#8211; Can Power Affect Returns?<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">This is where many structures fail the consolidation analysis.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Suppose ABC Corp.:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>manages the property,<\/li>\n\n\n\n<li>controls major decisions,<\/li>\n\n\n\n<li>and retains the residual economics.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">In that case, ABC Corp. possesses:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Power<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Variable returns<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? The ability to use power to influence those returns<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Under IFRS 10, this combination typically indicates control.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>3. Applying IFRS 10 to Our Example<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">Let&#8217;s revisit the structure.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Although:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>legal ownership was transferred to XYZ Trust,<\/li>\n\n\n\n<li>external investors participate through DEF Fund,<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">ABC Corp. may still:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>operate the property,<\/li>\n\n\n\n<li>influence strategic decisions,<\/li>\n\n\n\n<li>retain residual interests,<\/li>\n\n\n\n<li>absorb significant economic risks.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">If those facts exist, IFRS may conclude that:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">ABC Corp. controls the SPC.<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">As a result:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>DEF Fund may need to be consolidated.<\/li>\n\n\n\n<li>Assets remain in the consolidated balance sheet.<\/li>\n\n\n\n<li>Debt raised through the structure may also remain consolidated.<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">4. <strong>Why Many SPCs Are Consolidated<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">A common misconception is:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">&#8220;I own less than 50%, so I don&#8217;t control it.&#8221;<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">IFRS 10 does not rely solely on voting percentages.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Many SPCs have little or no meaningful voting rights.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Instead, control often depends on:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>contractual arrangements,<\/li>\n\n\n\n<li>decision-making rights,<\/li>\n\n\n\n<li>economic exposure,<\/li>\n\n\n\n<li>and practical ability to direct activities.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">This is why many structured entities are consolidated even when ownership percentages appear low.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">5. <strong>Practical IFRS 10 Checklist<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">When evaluating an SPC, ask:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Power<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">? Who makes key operating decisions?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Who controls asset disposal?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Who directs cash flow management?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Returns<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">? Who benefits from upside performance?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Who absorbs downside losses?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">? Who holds residual interests?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Linkage<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">? Can that party use its decision-making power to influence its returns?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the answer is &#8220;Yes&#8221; to all three areas, control may exist under IFRS 10.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\"><strong>6. The Relationship Between SPC 03 and SPC 04<\/strong><\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">A useful way to think about these two analyses is:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">SPC 03<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Can the asset be derecognized under IFRS 9?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">SPC 04<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Must the SPC be consolidated under IFRS 10?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Both analyses are required.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Passing one test does not automatically pass the other.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is why structured finance accounting can become surprisingly complex.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\" \/>\n\n\n\n<h1 class=\"wp-block-heading\">Final Thoughts<\/h1>\n\n\n\n<p class=\"wp-block-paragraph\">When reviewing an SPC structure, accountants should not stop at legal ownership.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Nor should they stop at the True Sale analysis.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The ultimate question is:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">Who really controls the economics of the structure?<\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">Because under IFRS 10, control\u2014not legal ownership\u2014determines consolidation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And in many cases, the answer is not the trustee, the fund, or even the external investors.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It may still be the original sponsor.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thanks for reading!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Understanding Control Under IFRS 10 Hello everyone, Global CPA here ?? In the previous article, we discussed one of the [&hellip;]<\/p>\n","protected":false},"author":276482313,"featured_media":226,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center 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