Question

Hospitality Inc. (HI) is a holding company that has wholly owned interests in the travel and entertainment industry. HI is listed on the Toronto Stock Exchange and is subject to the reporting requirements of the exchange and of the Ontario Securities Commission. The company has four operating divisions:
1. Travel Adventures Inc. (TAI) is a travel services company. The company sells vacation packages to vacation destinations, both at retail and at wholesale (i. e., to other travel agencies). TAI is incorporated in British Columbia and operates 12 retail travel offices in the province. The company also sells its package vacations throughout Canada through agencies in other provinces.
2. Sunsation Incorporated is a charter airline incorporated in Alberta that operates between Western Canada and various Caribbean and Central American vacation “sun destinations,” and also to Hawaii. Sunsation’s main customer is TAI. TAI buys bulk seat blocks on Sunsation’s flights and resells the seats at retail (and at wholesale to other retail travel agencies). Sunsation also provides flights to sun destinations for an Alaska- based tour company. As a Canadian airline, Sunsation must operate the flights through Vancouver.
3. Elegance Limited is a hotel management company that manages hotels in the Carib-bean, Costa Rica, and Mexico. Elegance is incorporated in the Cayman Islands— a “ tax haven” that imposes no income taxes on corporations. Many ( but not all) of TAI’s tours are booked into Elegance’s hotels.
4. Brookside Investments Corporation is a real estate company that owns and operates sev-eral commercial developments in Canada. Brookside also owns some of the hotels that are managed by Elegance, including all of the Mexican hotels that TAI uses for its tour groups.

Required:
What are the reporting implications of these three transactions? Explain how each would be shown on HI’s consolidated statements for the year ending 31 December 20X2. Be specific.



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  • CreatedFebruary 17, 2015
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