On 1 July 2019 Black Ltd was formed out of the reorganization of a group of...
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On 1 July 2019 Black Ltd was formed out of the reorganization of a group of companies with foreign operations. The directors are reluctant to disclose related party infomation as they feel that such transactions are a normal feature of business and need not be disclosed. Under the new group structure Black owns 80% of Red Ltd ,60% of Green Ltd and 30% of White Ltd. Black exercises significant influence over White Ltd. The directors of Black Ltd are also directors of Red Ltd and Green Ltd but only one director of Black Ltd sits on the management board of White Ltd. The management board of White Ltd comprises of five directors. Originally the group comprised of five companies but the fifth company Yellow Ltd which was a 70% subsidiary of Black Ltd, was sold on 31 January 2020. There were no Page 11 of 20 transactions between Yellow Ltd and Black Ltd during the year to 31 May 2020. 30% of the shares of Black Ltd are owned by another company, Ld which exerts significant influence on Black Ltd. The remaining 40% of the sahers of Green Ltd are owned by Pink Ltd which exerts significant influence on Green Ltd. The group structure is as follows: GREY LTD 30% BLACK LTD 80% IN RED LTD 60% IN GREEN LTD 30% IN WHITE. During the current financial year to 31 May 2020, Green has sold a significant amount of plant and equipment to Pink Ltd at the normal selling price for such items. The directors of Black Ltd proposed that where related part relationships are determined and sales are at normal selling price, any disclosures will state that prices charged to related parties are made on an arm's length basis. One of the directors of Red Ltd who is not on the management board of Black Ltd owns the whole of the share capital of a company, Blue Ltd that sells goods at market price to Green Ltd The director is in charge of the production at Green Ltd and also acts as a cons ultant to the management board of the group. Page 12 of 20 Required: 2.1 Describe the nature of related part transactions which exists in each of the following: Within the Black Ltd Group including Yellow Ltd b. Between Pink Ltd and the Black Ltd group c. Between Grey Ltd and the Black Ltd group Discuss why it is important to disclose related party transactions, explaining 9 the criteria which detemine a related part y re lations hip. a. 3 3 2.2 |ТОТAL 20 On 1 July 2019 Black Ltd was formed out of the reorganization of a group of companies with foreign operations. The directors are reluctant to disclose related party infomation as they feel that such transactions are a normal feature of business and need not be disclosed. Under the new group structure Black owns 80% of Red Ltd ,60% of Green Ltd and 30% of White Ltd. Black exercises significant influence over White Ltd. The directors of Black Ltd are also directors of Red Ltd and Green Ltd but only one director of Black Ltd sits on the management board of White Ltd. The management board of White Ltd comprises of five directors. Originally the group comprised of five companies but the fifth company Yellow Ltd which was a 70% subsidiary of Black Ltd, was sold on 31 January 2020. There were no Page 11 of 20 transactions between Yellow Ltd and Black Ltd during the year to 31 May 2020. 30% of the shares of Black Ltd are owned by another company, Ld which exerts significant influence on Black Ltd. The remaining 40% of the sahers of Green Ltd are owned by Pink Ltd which exerts significant influence on Green Ltd. The group structure is as follows: GREY LTD 30% BLACK LTD 80% IN RED LTD 60% IN GREEN LTD 30% IN WHITE. During the current financial year to 31 May 2020, Green has sold a significant amount of plant and equipment to Pink Ltd at the normal selling price for such items. The directors of Black Ltd proposed that where related part relationships are determined and sales are at normal selling price, any disclosures will state that prices charged to related parties are made on an arm's length basis. One of the directors of Red Ltd who is not on the management board of Black Ltd owns the whole of the share capital of a company, Blue Ltd that sells goods at market price to Green Ltd The director is in charge of the production at Green Ltd and also acts as a cons ultant to the management board of the group. Page 12 of 20 Required: 2.1 Describe the nature of related part transactions which exists in each of the following: Within the Black Ltd Group including Yellow Ltd b. Between Pink Ltd and the Black Ltd group c. Between Grey Ltd and the Black Ltd group Discuss why it is important to disclose related party transactions, explaining 9 the criteria which detemine a related part y re lations hip. a. 3 3 2.2 |ТОТAL 20
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Related Book For
Advanced Financial Accounting
ISBN: 978-0078025624
10th edition
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
Posted Date:
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