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.
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.
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.
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.
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 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.
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).
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).
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, goodwill can be computed as the difference between total net identifiable assets fair value and organization’s fair value (Uyar 2016).
Aasb.gov.au. (2017). [online] Available at: https://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.
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