Question

On September 1, 2013, Franklin Inc. acquired 40% of the voting shares of Gould Ltd. Under the company’s constitution, each share is entitled to one vote. On the basis of past experience, only 65% of the eligible votes are typically cast at the annual general meetings of Gould. No other shareholder holds a major block of shares in Gould.
Gould’s financial year ends on December 31 each year. The directors of Franklin argue that they are not required to include Gould as a subsidiary in Franklin’s consolidated financial statements at December 31, 2013, as there is no conclusive evidence that Franklin can control the financial and operating policies of Gould. The auditors of Franklin disagree, referring specifically to past years’ voting figures.
Required
Provide a report to Franklin on whether it should regard Gould as a subsidiary in its preparation of consolidated financial statements at December 31, 2013.


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  • CreatedJune 09, 2015
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