Examine each of the following independent situations and state whether control does or does not exist. Where there is control, you are to state which party controls the entity. Give reasons for your answers and make reference to, and show the relevance of, the appropriate paragraphs in AASB10.

(a) Blue Horizon Pty Ltd is a Ludmilla based business run by the Depp family. Market conditions have changed with technical innovations revolutionising the industry. The company has not managed to maintain its competitive edge and has lost market share. The company's bank, Gargantuan & Co has seized the company's assets, converted all the debt into equity and appointed two of the bank's directors to Blue Horizon Pty Ltd's board, which has a total of four members. The company's assets would not realise a great deal if sold. The board is considering further equity investment so that more up-to-date equipment can be purchased with the business attempting to trade out of the problem and then subsequently to sell the business as a going concern.

(b) Karama Ltd own 49 per cent of the shares of Jingili Ltd and has three seats on the board of directors. Alawa Ltd owns the other 51 per cent and has the remaining two out of the five board seats. Karama Ltd has been running the company with the approval of the passive shareholder Alawa Ltd.

(c) Farrar Ltd, Rosebery Ltd and Moulden Ltd each own 33.3 per cent of the share of Yarrawonga Prawns Pty Ltd, a small proprietary company. Rosebery Ltd has one board seat out of a total of three and runs the day-to-day business. Farrar Ltd and Moulden Ltd have one board seat each and are passive shareholders. (

Answer rating: 100% (QA)

Answer Lets analyze each situation in light of control according to the Australian Accounting Standards Board AASB 10 Consolidated Financial Statement... View the full answer