What defines control under IFRS 10?

Control under IFRS 10 is defined by three key components: the power over the investee, exposure to variable returns from the investee, and the ability to affect those returns through the use of power. This definition ensures that the focus is not solely on ownership or shareholding but also emphasizes the practical ability to influence the financial and operational decisions of the investee.

The "power over the investee" refers to the rights that give an investor the ability to direct relevant activities, which significantly affect the investee's returns. This could be achieved through voting rights or management agreements. "Exposure to variable returns" indicates that the investor not only has a stake in the investee but will also be affected by the performance of the investee, whether positively or negatively. Finally, the "ability to affect those returns" suggests that the investor can use their power to influence the returns they receive.

The other options do not encompass the comprehensive definition of control as outlined by IFRS 10. For instance, merely having majority shares or voting power does not automatically confer control unless it is coupled with the ability to affect returns. Similarly, being able to influence market trends or possessing physical assets does not imply control over another entity. Thus, the correct answer encaps