Charalampia A. Nousi Financial Accounting for Lawyers Homework 3 Question 4 To begin with the structure of the group, it should be stated that, in order to decide whether Alpha obtains control over Beta and Gamma or not, attention should be paid to the percentage of shares of Beta and Gamma which Alpha purchases. The key word on the basis of which we will realize whether Beta and Gamma are subsidiaries of Alpha or not is control . With the term “control”, we refer to a holding or parent company holding the majority (>50%) of the shares of another company (subsidiary). In the specific exercise, we see that on Janurary 1, 2014, Alpha purchased 60 million shares in Beta for an immediate payment of $100 million. Taking into consideration that each company’s share capital consists of shares, each of which has a value of $1, it should be stated that Alpha purchased 60 out of 80 million shares of the company Beta. In other words, Alpha obtained the 75% of Beta’s shares (75%>50%), so Alpha gained control over Beta. Therefore, Beta is a subsidiary of Alpha (parent or holding company). As far as the
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- Winter '15
- Dr. Andreou
- Financial Accounting, Generally Accepted Accounting Principles, Subsidiary, Parent company, Holding company, Alpha