The Definition of Reporting Entity: De Facto Control

The purpose of this paper reviews and evaluates the recent development and associated problems of ‘de facto control’ concept, which is used by IFRS in determining the scope of reporting entity. For this purpose, we examine two related IASB's projects; consolidation and conceptual frameworks-reporting entity. Further, we investigate how the reporting entity concept has been developed and applied to accounting practices in three different countries: The U.S., Germany and Japan. Finally we provide two quite different cases of Korean companies: STX Pan Ocean and LG. The cases reveal that the ‘de facto control’ concept could be interpreted quite differently by firms' management.