In early 2021, PT A and PT B (the parties) made arrangements through PT X, a...

 

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In early 2021, PT A and PT B (the parties) made arrangements through PT X, a separate legal entity, with percentage of voting rights of 60% and 40%, respectively. Decisions on relevant activities require the approval of 80% of the voting rights. The legal form of PT X states that assets and liabilities held by PT X represent assets and liabilities of PT X and not the assets and liabilities of PT A or PT B. The parties have not made any contractual arrangements to modify the rights and obligations granted under the legal form of PT X. In addition, PT X is required to sell all inventories produced only to PT A and PT B. Sales to other parties are not permitted. Hence, liabilities incurred by PT X are, in substance, satisfied by cash flows received from PT A and PT B through their purchases of output sold by PT X. During 2021: 1. Revenue of PT X from sales to PT A and PT B is Rp21 million and Rp15 million, respectively. 2. Related cost of goods sold is Rp20 million. 3. PT A resells all inventory purchased from PT X in 2022. Required: 1. Determine the type of such arrangement. 2. How much is the share of PT X's profits recognized by PT A in 2021? In early 2021, PT A and PT B (the parties) made arrangements through PT X, a separate legal entity, with percentage of voting rights of 60% and 40%, respectively. Decisions on relevant activities require the approval of 80% of the voting rights. The legal form of PT X states that assets and liabilities held by PT X represent assets and liabilities of PT X and not the assets and liabilities of PT A or PT B. The parties have not made any contractual arrangements to modify the rights and obligations granted under the legal form of PT X. In addition, PT X is required to sell all inventories produced only to PT A and PT B. Sales to other parties are not permitted. Hence, liabilities incurred by PT X are, in substance, satisfied by cash flows received from PT A and PT B through their purchases of output sold by PT X. During 2021: 1. Revenue of PT X from sales to PT A and PT B is Rp21 million and Rp15 million, respectively. 2. Related cost of goods sold is Rp20 million. 3. PT A resells all inventory purchased from PT X in 2022. Required: 1. Determine the type of such arrangement. 2. How much is the share of PT X's profits recognized by PT A in 2021?

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