Introduction to Groups

Your company owns 40% of another company - is that company your subsidiary?

• yes

• no

Your company owns 40% of another company - You have an arrangement with another investor who owns 20% that he will vote in line with you - is that company your subsidiary?

• yes

• no

Which of the following will be treated as a subsidiary of Poulgo Co as at 31 December 20X7?

(1)

The acquisition of 60% of Zakron Co’s equity share capital on 1 March 20X7. Zakron Co’s activities are significantly different from the rest of the Poulgo group of companies

(2)

The offer to acquire 70% of Unto Co’s equity share capital on 1 November 20X7. The negotiations were finally signed off during January 20X8

(3)

The acquisition of 45% of Speeth Co’s equity share capital on 31 December 20X7. Poulgo Co is able to appoint three of the ten members of Speeth Co’s board

• 1 only

• 2 and 3

• 3 only

• 1 and 2

Control partly means you have the rights to ________ of returns

• the variability

• 100%

Control means rights to the variability of returns and also..

• power to make decisions

• power to influence them

IFRS 10 Consolidated Financial Statements provides a definition of control and identifies three separate elements of control.

Which of the following are elements of control?

• Power over the investee

• The power to participate in the financial and operating policies of the investee

• Exposure to, or rights to, variable returns from its involvement with the investee

• The ability to use its power over the investee to affect the amount of the investor‘s returns

If a parent is 100% owned by another company - does it have to prepare group accounts for itself and its sub?

• No

• Yes

Petre owns 100% of the share capital of the following companies.

The directors are unsure of whether the investments should be consolidated.

In which of the following circumstances would the investment NOT be consolidated?

• Delta is located in a country where local accounting standards are compulsory and these are not compatible with IFRS used by the rest of the group

• Gamma is located in a country where a military coup has taken place and Petre has lost control of the investment for the foreseeable future

• Petre has decided to sell its investment in Alpha as it is loss-making; the directors believe its exclusion from consolidation would assist users in predicting the group’s future profits

• Beta is a bank and its activity is so different from the engineering activities of the rest of the group that it would be meaningless to consolidate it

How much difference can there be (worst case scenario) between a parent's year end and that of a sub?

• They must always be the same

• 3 months

When can a sub have a different year end to a parent?

• Never

• When it is impracticable for the sub