Unit 11 - Group Accounts I - v3

Unit 11 - Group Accounts I - v3 - Unit 11 Group Accounting...

Info icon This preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Slide no.1 Unit 11 – Group Accounting I - Companies Ordinance - HKAS 27 “Consolidated and Separate Financial Statements”
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Slide no.2 Definition of Subsidiary Company – Companies Ordinance HK Companies Ordinance (S.2) adopts two criteria Control, or Ownership Control - control the composition of Board of Directors, or - control more than half of the voting power Ownership - holds more than half of the issued share capital, or - a sub-subsidiary relationship
Image of page 2
Slide no.3 Definition of Subsidiary Company – HKAS 27 HKAS 27 defines a subsidiary is “an entity that is controlled by another entity”. Therefore, HKAS 27 focuses on control, and an entity may include not only a company but other forms of businesses e.g. partnership, trust etc. Meaning of control Power to govern the financial and operating policies so as to obtain benefits from its activities General rule usually control exists when a company owns (directly/indirectly) > 50% of voting power unless a few exceptions
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Slide no.4 Definition of Subsidiary Company – HKAS 27 Control may also exists even if owns 50% or less of the voting power of an entity when: Power over more than half of the voting rights by agreement or control contract, or Power to appoint or remove the majority of the members of Board of Directors or equivalent governing body, or Power to cast the majority of votes at meetings of Board of Directors or equivalent governing body, or Power to govern the financial and operating policies under a statue or an agreement
Image of page 4
Slide no.5 Conflicts between the Companies Ordinance and HKAS 27 Hong Kong Companies (Amendment) Ordinance 2005 To align the meaning of “Subsidiary” with the meaning of “Subsidiary” under the accounting standards Introduce the new concept of “subsidiary undertaking” and “parent undertaking” “Undertaking” can be a body corporate, a partnership or an unincorporated association carrying on a trade or business, whether for profit or not
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Slide no.6 Conflicts between the Companies Ordinance and HKAS 27 The new 23 rd Schedule of the Companies (Amendment) Ordinance 2005 enables Hong Kong incorporated companies to use the definition of subsidiary in HKAS 27 for the purpose of preparing group accounts. New tests for “subsidiary” The right to exercise a dominant influence from one undertaking (parent) over another undertaking (subsidiary) Who controls the board of directors in addition to voting rights
Image of page 6
Parent / Subsidiary Relationship Control by Dominant Influence Both the investor company and the investee company retain their individual and separate identities. A majority holding constitutes what is termed a controlling interest and has ‘the right to exercise a dominant influence’. A dominant influence means that the holder of it (i.e. the investor company) has a right to give directions with regard to the operating and financial policies of the investee company.
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern