Falls Ltd and Creek Ltd decided to jointly undertake the manufacture of an electric car. They formed
Question:
Falls Ltd and Creek Ltd decided to jointly undertake the manufacture of an electric car. They formed Silver Ltd, which will manufacture the car. Falls Ltd and Creek Ltd provide the various parts for the manufacture of the car, which is assembled by Silver Ltd.
Falls Ltd and Creek Ltd each hold 50% of the voting rights in Silver Ltd and receive 50%
of the cars produced by Silver Ltd. Falls Ltd and Creek Ltd then sell the cars in their own geographic region. The constitution of Silver Ltd requires that the operations of the company must be in accordance with a business plan prepared annually, and to which both Falls Ltd and Creek Ltd both agree. Silver Ltd has six directors, with three being appointed by Falls Ltd and three by Creek Ltd.
Required
Evaluate whether a joint arrangement exists and how it should be classified.
Step by Step Answer:
Financial Reporting
ISBN: 9780730396413
4th Edition
Authors: Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes