Question

In: Accounting

Question 7. Which of the following should be accounted for as subsidiaries in the consolidated financial...

Question 7. Which of the following should be accounted for as subsidiaries in the consolidated financial statements of Seabass Co?


  2. Seabass Co owns 45% of Cod Co, but has a majority of seats on the Board which gives Seabass Co power over Cod Co

  4. Seabass Co owns 60% of Haddock Co, and has 49% of the voting rights. The remaining 51% of the voting rights are controlled by a single shareholder.

  6. Seabass Co owns 80% of the preference share capital of Sole Co which carry no voting rights


Cod Co, Haddock Co and Sole Co

Haddock Co and Sole Co only

Cod Co only

Haddock Co only

Solutions

Expert Solution

Answer is (c) Cod Co only.

As per IFRS 10, A company will be a holding co. to another entity if it has control over that other entity.

Case 1 - Cod co: Even though Seabass Co holds 45% of Cod co, it has majority of seats on the board which gives it control over relevant activities and therefore Seabass Co controls Cod Co.

Case 2 - Haddock Co: In this case, even though Seabass Co owns 60% of Haddock Co, it has 49% of voting rights and the remaining 51% is in the hands of a single shareholder who can direct and control the relevant activities through that. Therefore Seabass Co doesnot control Haddock Co.

Case 3 Sole Co: As preference shares carry no voting rights, Seabass Co doesnot control Sole Co.

Thus from above, it is evident that Seabass Co controls only Cod Co . Therefore, it will be accounted for as subsidiaries in the consolidated financial statements of Seabass Co.

Please feel free to ask any queries and do give a thumbsup if the solution was satisfactory. Thankyou.   

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Which of the following is a limitation of consolidated financial statements? Consolidated financial can mask the...
Which of the following is a limitation of consolidated financial statements? Consolidated financial can mask the performance of weaker companies. Ratios and percentages derived from consolidated financial statements can be deceptive because they are composite (weighted) averages. Consolidated statements can eliminate detail about product lines, divisional operations, and the relative profitability of various business segments Answers “a” and “b” only All of these are limitations of consolidated financial statements.
IAS 7 - Consolidated Cash Flow Statement The following are the consolidated financial statement from the...
IAS 7 - Consolidated Cash Flow Statement The following are the consolidated financial statement from the records of MT Bhd (MTB) for 2011 incorporating its subsidiary JK Bhd (JKB). Consolidated Statement of Comprehensive Income for the year ended 31 December 2011 (RM)’000 (RM)’000 Sales 6,220 Cost of Goods Sold (2,700) Gross Profit 3,520 Less Expenses: Depreciation 180 Insurance Expenses 24 Other Expenses 1,076 (1,280) Operating Income 2,240 Gain on sale of Plant 20 Total Comprehensive Income 2,260 Profit after tax...
9a. Consolidated financial statements are prepared when one company has:a) Accounted for the investment as securities...
9a. Consolidated financial statements are prepared when one company has:a) Accounted for the investment as securities available for sale.b) Accounted for the investment using the equity method. (This answer is wrong)c) Control over another company.d) None of these answer choices are correct. 9b. When the investor's level of influence changes, it may be necessary to change to the equity method from another method. When the level of ownership rises from less than 20% to a range of 20% to 50%,...
Wahl Company’s consolidated financial statements include two wholly owned subsidiaries. One subsidiary is located in Australia...
Wahl Company’s consolidated financial statements include two wholly owned subsidiaries. One subsidiary is located in Australia and the other is located in France. The functional currency for the Australian subsidiary is the U.S. dollar. The European euro is the functional currency for the subsidiary located in France. Given this scenario, address the following with research to support your opinions: What are the objectives of translating a foreign subsidiary’s currency? Why? How do gains and losses arise from the translation or...
In the preparation of consolidated financial statements, why are adjustments required to the subsidiaries assets and liabilities if the carrying amounts are not equal to fair value?
In the preparation of consolidated financial statements, why are adjustments required to the subsidiaries assets and liabilities if the carrying amounts are not equal to fair value?Using the following example, demonstrate the adjustment required when the subsidiary has a contingent liability for damages disclosed, for which the fair value is determined to be $10,000. Explain in detail the journal entry, line by line. Then show how this would be posted in the consolidation worksheet, highlighting the effect to the group's...
Why should consolidated financial statements be prepared? Do they exhibit financial strength of goodwill?
Why should consolidated financial statements be prepared? Do they exhibit financial strength of goodwill?
what constitutes "consolidated financial statements. Explain the meaning of consolidated financial statements. the definition of consolidated...
what constitutes "consolidated financial statements. Explain the meaning of consolidated financial statements. the definition of consolidated financial statements from the FASB's Master Glossary. outline the year-end steps to comply with the new FASB statements.
Determine whether each of the following scenarios should be accounted for as an intangible asset and,...
Determine whether each of the following scenarios should be accounted for as an intangible asset and, if so, whether it meets the criteria for recognition. Justify your conclusions. 1. Clothier Entity has developed a successful brand for its designer clothing that allows Clothier to charge a premium. The entity spends large amounts on maintaining and developing the brand. 2. Gumbo Entity purchased a fishing license from the government last year that allows it to fish for the next five years....
Determine whether each of the following scenarios should be accounted for as an intangible asset and,...
Determine whether each of the following scenarios should be accounted for as an intangible asset and, if so, whether it meets the criteria for recognition. Justify your conclusions. a. Clothier entity has developed a successful brand for its designer clothing that allows Clothier to charge a premium. The entity spends large amounts on maintaining and developing the brand. b. Gumbo Entity purchased a fishing license from the government last year that allows it to fish for the next five years....
Which of the following should be the goal of the financial manager?
Which of the following should be the goal of the financial manager? to maximize market share to maximize current stock value to maximize profit to maximize earnings
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT