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Unformatted text preview: 1 SOLUTIONS TUTORIAL 7 Chapter 22 – Controlled entities: the consolidation method DISCUSSION QUESTIONS 21. Required Discuss the potential for Gilder Ltd being classified as a subsidiary of Croc Ltd. Part A Croc Ltd Glider Ltd 40% - NCI = 60% - n o o t h e r p a r t y > 3 % i n t e r e s t- o n l y 7 5 % a t t e n d a n c e a t A G M l a s t y e a r Discuss: - the concept of control - the need for judgement - factors to consider when determining the existence of control - apply to above situation Expect that Croc Ltd is the parent of Glider Ltd. Part B Consider: - the importance of “power” in the definition of control - the difference between actual control and capacity to control; the party actually controlling the other entity may not have the capacity to control. Just because Croc Ltd’s nominees are elected as Board members does not automatically mean that it becomes the parent of Glider Ltd. - If holders of 90% of the voting shares attended the AGM, then holders of 50% of the shares could have outvoted Croc Ltd. They may allow Croc Ltd to manage the shares could have outvoted Croc Ltd....
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- One '11
- Generally Accepted Accounting Principles, Subsidiary, Business combination valuation, Croc Ltd