Energy Ltd holds 40 per cent of the voting rights of Solar Ltd and twelve other investors
Question:
Energy Ltd holds 40 per cent of the voting rights of Solar Ltd and twelve other investors each hold 5 per cent of the voting rights of Solar Ltd. A shareholder agreement grants Energy Ltd the right to appoint, remove and set the remuneration of management responsible for directing important operating and financial activities. To change the agreement, a two-thirds majority vote of the shareholders is required.
Required:
Using each component of the definition of control in AASB 10 Consolidated Financial Statements, explain whether or not Energy Ltd has control of Solar Ltd and why you reached this decision. Your answer must evaluate each component of the definition of "control" under the relevant accounting standards.
Financial Accounting for Decision Makers
ISBN: 978-0273763451
6th Edition
Authors: Peter Atrill, Eddie McLaney