Corporate Accounting 3 Assignment Solution - University Name

This document provides a detailed solution to a corporate accounting assignment. It addresses key concepts such as investment relationships, control assessment based on AASB 10, and consolidation requirements. The solution analyzes various scenarios, including the determination of control based on voting rights, the impact of protective rights, and the complexities of shared control. The assignment also covers the calculation of goodwill in different acquisition scenarios, including partial and full ownership, and explains the methods for determining goodwill valuation under consolidation accounting, referencing relevant accounting standards and literature. The solution includes a comprehensive reference list.

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

1CORPORATE ACCOUNTING
Answer to question 1:
Investment relationship a-
There are two shareholders of LBX Pty limited that is founder of LBX and MC. Owner
of LBX that is Mr. T and Mrs. T. holds majority of shares. Entities are required to assess facts
and circumstances for determination of control. MC is entitled to take all decisions of
organization and they have majority of seats in board of directors. All the leading activities of
LBX Pty limited is directed by MC while participating in such activities. MC is entitled to
exercise control and functions over investee in accordance with paragraph 10 of AASB 10. As
per B 36 of AASB, an investor can exercise control over the investee if they have majority of
voting rights provided voting rights are functional (aasb.gov.au 2017). Therefore, MC can
exercise power of control over LBX Pty limited.
Investment relationship b-
The requirement of control test and consolidation can be determined is required to assess
protective rights. Applicability of such rights are don in some exceptional circumstances and
when organization are required to make any fundamental changes. BBT has failed to make
repayment of loan to MC due to uncertain economic climate. MC monitors the control of
finances of BBT and its recording of expenses for the period of five years. Nonetheless, MC does
not have any seats in the board of directors and therefore, they do not have any voting rights. In
such scenario, no consolidation is required and they cannot exercise any control on board of
directors.
Investment relationship c-

2CORPORATE ACCOUNTING
MC and BJL are the two shareholders of CTL that have equal voting rights in board of
directors and have shares in board of directors. Management services of CTL is looked after by
BJL for which they charge remuneration fees and MC is engaged in supplying loans. For
determining the control in such scenario, investors are required to collectively engage in
directing relevant activities. According to paragraph 9 of AASB 10, if an organization has two or
more investors, then control cannot be exercised by individually and they are required to
collectively engage in decision-making (aasb.gov.au 2017). Since, investors are not actively
involved in decision-making and they are not cooperative, therefore they cannot exercise control
over CTL. Each investors needs to account for their interest in controlling activities of investee
accordance to AASB 11.
Investment relationship d-
PGH Pty Limited has three investors named MC, GJL and CCL each having equal share
of 33.3%. MC has one seat in board of director and they are actively engage in managing
activities. Other investors that is GJL and CCL are not actively engaged in directing and
managing daily activities of PGH Pty limited, as they are passive investors. It is possible for
investors to have more than passive interest that provides them with required power to direct the
activities of business according to paragraph B-19 of AASB 10 (aasb.gov.au 2017). Hence,
business of PGH would be controlled by MC although there does not exist any rights, they are
fulfilling criteria of exercising control.
Investmentrelationship e-
MC holds majority of shares of JB-Hi-Fi Ltd, however they are not involved in any
decision and have no seats in board of directors. Consolidation of assets has been resulted from

3CORPORATE ACCOUNTING
their deficiency. MC does not enjoy voting rights despite having majority of shares (Zadeket al.
2013). In accordance with paragraph B-38 of AASB 10, an investor can exercise control despite
not having voting rights (aasb.gov.au 2017). In the given situation, MC is a passive investor that
does not have any voting rights and are not involved in directing activities. Therefore, control of
JB-Hi-Fi does not rest in MC.
Answer to question 4:
Requirement a:
In this particular scenario, Wiley and Sons Australia acquire 70% of shares of Wiley Plus
Limited. Equity interest has been acquired by acquire by way of acquisition. Calculation of
goodwill under such scenario is done at the date of acquisition and the amount is calculated of
the fair value of interest rate of acquire. There is no transferring of equity interest and the
determination of interest is done using valuation technique (Renner 2013).
Requirement b:
The additional ownership of acquisition of interest requires calculation of goodwill by
referring to fair value adjustments. Value of assets recognized at the date of acquisition is used
for deducting the loss generated from impairment (Zadek et al 2013).
Requirement c:
There are two possible ways for determining the goodwill valuation under consolidation
of accounting. It is possible to have either 100% ownership or 50% ownership in any entity. In
the first option, goodwill can be calculated as the difference between value of purchase
consideration and share of net identifiable assets fair value for acquirer. In second option,

4CORPORATE ACCOUNTING
goodwill can be computed as the difference between total net identifiable assets fair value and
organization’s fair value (Uyar 2016).

5CORPORATE ACCOUNTING
References list:
Aasb.gov.au. (2017). [online] Available at:
http://www.aasb.gov.au/admin/file/content105/c9/AASB10_08-11.pdf [Accessed 11 Oct. 2017].
Maas, K., Schaltegger, S. and Crutzen, N., 2016. Integrating corporate sustainability assessment,
management accounting, control, and reporting. Journal of Cleaner Production, 136, pp.237-
248.
Ramesh, B., 2013. The role of forensic accounting in modern corporate accounting
world. ZENITH International Journal of Multidisciplinary Research, 3(1), pp.224-233.
Uyar, A., 2016. Evolution of corporate reporting and emerging trends. Journal of Corporate
Accounting & Finance, 27(4), pp.27-30.
Zadek, S., Evans, R. and Pruzan, P., 2013. Building corporate accountability: Emerging practice
in social and ethical accounting and auditing. Routledge.
Zhang, N., 2014. Research on the Influence of Accounting Environmental Change on Financial
Accounting Theoretical Innovation.