It is the groups policy to value the non-controlling interest at its proportionate share of the fair value of the subsidiarys identifiable net assets.

Sunrise acquired a seventy percent holding in Cloud, a public limited company, on 1 July 2015. The fair values of the assets acquired were as follows.

Goodwill was impairment tested on 30 June 2016 and any impairment was included in the financial statements for the year ended on 30 June 2016. (g) The Finance Director has set up a company, Star, through which Sunrise conducted its investment activities. Sunrise has paid $400 million to Star during the year and this has been included in dividends paid. The money was invested in a specified portfolio of investments. Ninety-five per cent of the profits and one hundred percent of the losses in the specified portfolio of investments are transferred to Sunrise. An investment manager has charge of the companys investments and own all the share capital of Star. An agreement between the investment manager and Sunrise sets out the operating guidelines and prohibits the investment manager from obtaining access to the investments for the managers benefit. An annual transfer of the profit/loss will occur on 30 June annually and the capital will be returned in four years time. The transfer of $400 million cash occurred on 1 January 2016, but no transfer of profit/loss has yet occurred. The statement of financial position of Star at 30 June 2016 is as follows.

Discuss the issues which determine whether STAR should be consolidated by SUNRISE in the group financial statement (15 marks)

3) Discuss briefly the importance of ethical behavior in the preparation of financial statements and whether the creation of Star could constitute unethical practice by the finance director of Sunrise