PT A owns 40% ordinary shares of PT B and is exposed to variable returns from its involvement in PT B. The remaining 60% of PT B’s shares are owned by hundreds of unrelated shareholders and none own more than 5% individually.
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PT A owns 40% ordinary shares of PT B and is exposed to variable returns from its involvement in PT B. The remaining 60% of PT B’s shares are owned by hundreds of unrelated shareholders and none own more than 5% individually. There are no arrangements for shareholders to consult with one another and experience shows that only a few shareholders exercised their voting rights at all. The relevant activities of PT B are directed by the voting rights granted through the common shares.
Required:
1. In the above situation, does PT A control PT B? Please explain and give reasons.
2. Would your answer be the same if the remaining 60% of PT B’s shares are owned by 2 investors each 27% and 3 other investors each 2%? Please explain.
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- Which of the following situations are unlikely to represent control over an investee? A. Owning 51%, but the constitution requires that decisions need the unanimous consentof shareholders B. Having currently exercisable options which would take the shareholding in theinvestee to 55% C. Owning 40% of the shares but having majority of voting rights within the investee D. Owning 55% and being able to elect 4 of the 7 directorsP Ltd owns 55% of the shares of S Ltd. Each share entitles the holder to one vote at the AGM.The decisions made at the AGM direct the relevant activities of S Ltd.Identify the correct statement(s) regarding control.(i) P Ltd holds the majority of the voting rights at the AGM.(ii) P ltd has the ability to use its majority voting rights at the AGM to affect its returns.(iii) P Ltd is not exposed to variable returns from S Ltd through dividends and the value of investment in S Ltd.(iv) P Ltd has control over S Ltd and S Ltd is a subsidiary of P Ltd.Select one:a.(i), (ii) and (iii)b.(i) and (iv)c.(i), (iii) and (iv)d.(i), (ii) and (iv)Rose plc has two shareholders: · Investor A plc owns 60% of Rose plc’s ordinary shares and voting rights; · Investor B plc owns the remaining 40%. Rose plc’s articles of association stipulate that at least 80% of the voting rights are required to make decisions about Rose’s relevant activities. Rose plc does not depend on its shareholders for settling its liabilities and no shareholder has contractual rights or obligations to the individual assets nor liabilities of Rose plc. How should the investment in Rose plc be consolidated in Investor A plc’s group financial statements according to IFRS? a. As a subsidiary b. As an associate c. As a joint venture d. As a joint operation e. As a liability
- ‘An associate is an entity over which the investor has significant influence’ (para 3). Which of the following indicate the presence of significant influence? A. The investor controls the votes of a majority of the board members B. The investor is able to insist that all of the sales of the investee are made to a subsidiary of the investor C. The investor owns 330,000 of the 1,500,000 equity voting shares of the investeeBob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts. Required:Explain to Bob how the cost should be charged to shareholder’s equity accounts. Please provide specific responses for the following circumstances:1) When the cost is lower than the average price per share.2) When the cost is higher than the average price per share.1.) PT Patua owns 51% of PT Anaka's shares. The Board of Directors consists of 4 directors. There are 2 directors who are representatives of PT Patus. In every Board of Directors meeting, decision making is mostly determined by the director of PT Patua. Does PT Patua have control over PT Anaka under these conditions? Explain why using the IFRS 10 definition of control.
- Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer) a. Prosperity does not have power over MNO Co. because its holding is not sufficient rights to give power. b. The 40% interest above is presumed to have a de-facto control over MNO Co. because of the relative dispersion of other shares. d. Prosperity does not power over MN because it holds only protective right.When an investor owns 20% to 50% of the voting stock of an investee company, the investor is presumed to exercise significant influence over the investee unless there is evidence to the contrary. Describe some factors that could be evidence of significant influence? Describe some factors that could be evidence of a lack of significant influenceWhen an investor is deemed to have control" over an investee, GAAP requires presentation of consolidated financial statements. Which of the following would not be considered an indicator of control?\\nSelect one:\\nA. The investor owns 40% of the investee's stock and the rest is owned by the investee's founder.\\nB. The investor has majority interest in the investee.\\nC. Instead of owning stock, a company licenses technology to another company in an agreement allowing the licensor to appoint a majority of the licensee's board of directors.\\nD. The investor owns 40% of the Investee's stock and the rest is owned by a large number of small investors.
- Recently, ABC Ltd learned that one of its own minority shareholders registered a new company and was secretly competing with ABC Ltd for business opportunities. Briefly analyse whether ABC Ltd can amend its constitution for the purpose of expropriating the minority shareholder's shares.Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer) Group of answer choices A.Prosperity does not power over MNO because it holds only protective right. B.Prosperity has power over MNO Co. because Prosperity owns the highest percentage of shares. C.The 40% interest above is presumed to have a de-facto control over MNO Co. because of the relative dispersion of other shares. D.Prosperity does not have power over MNO Co. because its holding is not sufficient rights to give power.b) Demonstrate that in principle the shareholders will be equally well off by subscribing to the issue or by selling their rights. Assume the shareholder has 100 shares c) Explain the impact on the value of the right if the issue is undertaken on the specified terms and the share (cum-rights) price falls to € 1.8 shortly after the shareholders are invited to subscribe to the new issue