Group Structure: Controlled Entities. additional question b) ZYX Pty Ltd is a family-run book publisher that has purposely refrained from using hightechnology equipment over the past five years as the directors (the L family) considered it  to be a 'fad' and a waste of the company's resources. As a result, the company's antiquated  equipment has failed to produce quality material and has been very inefficient compared  with ZYX's competitors. During the current year, the company's bankers took possession  of the company's assets, converted all the debt into equity, and two directors of the bank  were appointed to ZYX's board, which now totals four people. The bank is undecided on  whether it should sell the company's assets, which have little recoverable value or inject  further equity into the company, purchase more advanced equipment and attempt to trade  on and sell the business as a going concern.

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a) SPG Ltd, a supplier of sailing equipment, was incorporated 10 years ago and is 60 percent owned by GPS Ltd. SPG has been a very successful business, averaging annual profits of $500 000. However, during the past two years, the company has run into financial difficulties and has defaulted on its loan with its bank. Consequently, the bank has used the powers in the loan agreement to monitor the company's activities closely to obtain repayment of its debt. The company must now obtain the bank's authorization for any expenditure over $5000 and no changes in operations of the company are permitted without the bank's approval. For each of the above situations, determine whether or not control exists and, if so, by which party (under IFRS 10)AASB 10. Discuss the reasons for your answers a) SPG Ltd, a supplier of sailing equipment, was incorporated 10 years ago and is 60 percent owned by GPS Ltd. SPG has been a very successful business, averaging annual profits of $500 000. However, during the past two years, the company has run into financial difficulties and has defaulted on its loan with its bank. Consequently, the bank has used the powers in the loan agreement to monitor the company's activities closely to obtain repayment of its debt. The company must now obtain the bank's authorization for any expenditure over $5000 and no changes in operations of the company are permitted without the bank's approval. For each of the above situations, determine whether or not control exists and, if so, by which party (under IFRS 10)AASB 10. Discuss the reasons for your answers

Answer rating: 100% (QA)

a SPG Ltd In the scenario of SPG Ltd control is likely to exist and GPS Ltd is the controlling party ... View the full answer