Sun Ltd is owned 50 per cent by Ted Ltd and 50 per cent by Tex Ltd
Question:
Sun Ltd is owned 50 per cent by Ted Ltd and 50 per cent by Tex Ltd (the founding shareholders). Each has two seats on the board, with no party having a casting vote, although Ted Ltd appoints the managing director. Profits are split 50–50 after the provision of the managing director’s salary. Tex Ltd has agreed that it will pay a management fee to Ted Ltd, equivalent to 50 per cent of the results for the year. Ted Ltd is the holder of 10 options, which are exercisable at any time at a 10 per cent discount to the fair value of the shares as at the exercise date.
Required
Determine whether or not control exists and, if so, by which party (pursuant to AASB 10). Discuss the reasons for your answers.
Fundamental Managerial Accounting Concepts
ISBN: 978-1259569197
8th edition
Authors: Thomas Edmonds, Christopher Edmonds, Bor-Yi Tsay, Philip Olds