Financial Accounting and Reporting Individual Assignment ACCM4300

This document presents a solution to a Financial Accounting and Reporting assignment, addressing a case study involving parent-subsidiary relationships. The assignment requires the student to analyze various scenarios, including those of Tom Ltd and its subsidiaries, and determine the existence of a parent-subsidiary relationship based on the Australian Accounting Standards Board (AASB) 10. The solution provides a detailed explanation of each issue, relating them to the relevant clauses of AASB 10, and concludes with recommendations on whether consolidated financial statements are required. The student, acting as a graduate accountant, drafts a memorandum in response to a manager's request, demonstrating an understanding of accounting principles and the ability to apply them to real-world scenarios. The assignment also involves a video presentation summarizing the findings, showcasing communication skills.

Running head: FINANCIAL ACCOUNTING AND REPORTING
Financial accounting and reporting
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

FINANCIAL ACCOUNTING AND REPORTING
Samantha: Hello sir.
Kind Edwards: Hi, how are you doing?
Samantha: I am good Sir. Was busy addressing the issues that you raised.
King Edwards: I have seen the solution which you have provided against the issues raised.
Samantha: Yeah, I have addressed all the issues which were mainly regarding the parent-
subsidiary relationship of the company.
King Edwards: Can you explain me the issues briefly in relation to Australian Accounting
Standards.
Samantha: Sure sir, I will address the issues one by one with relation to AASB.
King Edwards: Okay, the first issue was regarding the Tom and Tools Ltd; both of them were
holding 50% of the shares.
Samantha: The issue was to determine the parent company and the subsidiary company. As we
have seen in the issue that Tom Ltd aggress with the Toots Ltd in providing the required thing to
the manager. Therefore, Tom Ltd is giving the fee to Toots Ltd for management, Tom ltd is
considered as a parent company.
King Edwards: What is the condition for accessing control as per AASB 10?
Samantha: As per AASB 10, in B2 paragraph an investor possess the power and control over the
investee. Thus, it is considered that the Tom Ltd is having power to direct relevant activities of
Jerry ltd. So, as per the standards it is considered that Tom Ltd should prepare the consolidated
financial statement.

FINANCIAL ACCOUNTING AND REPORTING
King Edwards: What was the issue with Tom Ltd in second case?
Samantha: The second issue was regarding the percentage acquired by Tom was 35% and four
directors was also of Tom Ltd.
King Edwards: What do u determine from the issue?
Samantha: It can be clearly determined from the issue that Tom Ltd has acquired 35% of the
share. Out of six directors, four directors are being appointed by Tom Ltd.
King Edwards: how can we relate to AASB 10?
Samantha: As per AASB 10 Tom Ltd has the power over Tyke Ltd. and it will have the rights to
vary the returns from the investee.
King Edwards: how can we conclude the issue?
Samantha: From the second issue it is considered that Tom Ltd is the parent company and it
should prepare a consolidated financial statement.
King Edwards: So, the third issue is with the majority of shareholders?
Samantha: In the third issue it is seen that Tom Ltd holds 30% share which is issued by Toodles
Ltd. the other shareholders holds in an average of 10%. Thus the majority of the share is taken by
Tom Ltd. So, Tom Ltd has the power and the rights over Toodles Ltd.
King Edwards: What was the ratio of the directors in Tom Ltd?
Samantha: Further in the issue out of seven directors four are appointed by Tom Ltd.
King Edwards: Can u relate with the AASB 10?

FINANCIAL ACCOUNTING AND REPORTING
Samantha: As per AASB 10, Tom Ltd has more number of directors, and the majority of the
shres. Therefore the parent-subsidiary relationship exists. To conclude, Tom Ltd is considered as
parent company. So, the consolidated financial statement is required for Tom Ltd.
King Edwards: What the last issue with the equity share?
Samantha: Lastly, the issue was that Tom Ltd was holding 80% of equity of Beep Ltd, which
owns 100% of the Looney Ltd. In this issue, Tom Ltd was holding 80% share; so it will be
considered as the parent company as it holds the majority of the share among all the companies.
As a parent company, Tom Ltd will have to make a consolidated financial statement.
King Edwards: And what about the issue with Beep Ltd instruments traded in the public?
Samantha: In the later part of the issue, the instruments of Beep Ltd were traded publicly. Here
there was a breach as per the AASB 10, because Beep Ltd does not prepare consolidated
financial statement. If any company wants their instrument to trade publicly, then the preparation
of the Consolidated Financial Statements is needed.
King Edwards: So after the discussion, we can conclude that there is a parent subsidiary
relationship and Tom Ltd should prepare consolidated financial statement.