Corporate Accounting Assignment AASB 10

Running head: CORPORATE ACCOUNTING
Corporate accounting
Name of the University
Name of the student
Authors note

1
CORPORATE ACCOUNTING
Answer to question 1:
Investment relationship a-
LBX founders that is Mr and Mrs. T owns 75% of shares of LBX Pty limited and the
remaining shares are held by MC. MC takes all the leading decisions of organization and they
have voting rights as they have three seats on board of directors and is entitled to take all
decisions on their part. As MC is involved in directing all leading activities of LBX Pty limited
and they participate in directing such activities. Then according to paragraph 10 of AASB 10,
MC can exercise power and control over functioning of investee. Since, MC has majority of
seats in board of directors, they exercise major voting rights. MC can exercise power of control
over the LBX functions in accordance with paragraph, B 36 of AASB, an investor having more
than half of voting rights can exercise control over investees if the voting rights are substantive
(aasb.gov.au 2017). For determination of control, they are required to make all the assessments
of circumstances and facts.
Investment relationship b-
MC is required to assess rights whether they are protective rights while determining the
requirement of consolidation and control tests. When making any fundamental changes, such
rights are entitled and there applicability are done in some exceptional circumstances. BBT Ltd
has engaged with MC for receiving substantial loan amount, however, due to uncertain economic
climate, they are unable to make loan repayment. In this regard, BBT limited has assigned MC
executives to look after the payments and took over the control of finances for over five years
period (Bevis 2013). Since, MC has gained no seats over board of directors, therefore MC cannot
exercise control and there is no requirement of consolidation.

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CORPORATE ACCOUNTING
Investment relationship c-
CTL has two shareholders that is MC and BJL each having equal voting rights and equal
share of seats in board of directors. MC is engaged in supplying loans and BJL look after
management services for which they charge remuneration fees. Management fees payable are
considered as variable as they are payable depending upon CTL performance. In such situation,
when determine where the control rest requires that both investors should be collectively
responsible for directing all relevant activities (Panaretou et al. 2013). No individual investors
can exercise control over investee individually according to paragraph 9 of AASB 10. Without
the cooperation of each other, investors and not being involves in directing relevant activities,
they cannot control the CTL (Bloxham 2015). In accordance with relevant accounting standard
such as AASB 11, interest of controlling the investors should be accounted by each investors that
is BJL and MC.
Investment relationship d-
In this particular scenario, there are three investors of PGH Pty limited each having
33.3% of shareholders. MC actively manages day-to-day activities of PGH business and they
have one seat in board of directors. On other hand, other investors are the passive investors
having one seat in board of directors but they are not actively involves in managing daily and
relevant activities of business. According to paragraph B-19 of AASB 10, investors might have
more than passive interest in any entity business and this gives them sufficient power to exercise
control over investee business activities (El-Firjani et al. 2014). MC is responsible for managing
the daily activities involved for running the business of PGH Pty limited. Therefore, MC would

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CORPORATE ACCOUNTING
have some control over investees business because they have the current ability to direct the
relevant activities even though the rights to direct is yet to exercise.
Investment relationship e-
MC holds majority of shareholder interest of JB-Hi-Fi, they have no seats in board of
directors, and they are not involves in any financing or operating decisions. There has been large
deficiency in assets of investees and poor performance has resulted in consolidation of same.
Despite holding majority of shares, they do not enjoy any voting rights of JB-Hi-Fi. Although,
investors not having any voting rights can exercise control over the JB-Hi-Fi business if they are
involved in directing relevant activities and are engaged in any contractual agreement according
to paragraph B-38 of AASB 10 (Kravet 2014). In the given scenario, MC is not involved in
managing relevant activities, do not have a voting rights, and they are merely a passive investor
(Chaibi et al. 2014). Therefore, MC cannot exercise any control over JB-Hi-Fi business
activities. Nonetheless, consolidation is required in respect of assets of JB as recovery of loan is
uncertain and MC should take into account management of their assets.
Answer to question 2:
Answer to question 2a:
Acquisition Analysis:
Particulars
Carryi
ng
Amou
nt
Fair
Value
Net
Fair
Value
Share Capital $0
$500,0
00
$500,0
00