QUESTION $4$

$(10$ marks$)$

Bundu Limited $($hereafter "Bundu"$)$ is a newly established production service company specialising in producing in$-$house films as well as owning subsidiary development companies.

Ms Bundu Jane, the chief operating officer and chief financial officer, has heard about a new standard that deals with the principles of control which has replaced IAS $27$Consolidation and Separate Financial Statements. As she has not read the new standard yet she is uncertain of how it applies to the transaction below. She has requested your assistance with regards to the treatment of the acquisition of the shares.

Bundu acquired $60\%$ of the voting rights in Scandal Limited $($hereafter "Scandal"$)$ when they purchased $60\%$ of the issued shares of Scandal on $1$ January $2024.$ Scandal is a production company whose operational activities include the scheduling of actors and actresses; the script$-$writing process; the organisation of the production staff for the film; as well as the post$-$production, distribution and marketing of films.

On reading the terms and conditions of the share purchase agreement, it became evident that Bundu had also entered into an agreement with Lionsgate Limited $($hereafter "Lionsgate"$).$ Lionsgate owns the remaining $40\%$ of the shares and voting rights in Scandal. Per the terms of the agreement between Bundu and Lionsgate, Bundu will defer to the wishes of Lionsgate with respect to voting. This means that Bundu has left all voting decisions to Lionsgate and will not vote at all. Bundu has agreed to this as this is their first involvement in a major film production company and they have no expertise in the operations of Scandal.

Bundu is bound to the above voting agreement with Lionsgate for the next two years and will be subject to a massive penalty should they discontinue with the agreement. Bundu believes that two years will be sufficient for them to gain the necessary expertise to enable them to direct the operations of Scandal in the future.

The year$-$end of all companies is $31$ December.

REQUIRED:

$4\mathrm{.}1)$ Discuss, with reference to IFRS $10$ Consolidated Financial Statements who exercises control over Scandal Ltd for the period ended $31$ December $2024.$I