Question

The Directors of Brisbane Ltd (a listed company) have come to your accounting firm to seek...

The Directors of Brisbane Ltd (a listed company) have come to your accounting firm to seek advice on how to account for the investments they have in the five (5) entities-- Canberra Ltd, Sydney Ltd, Melbourne Ltd, Adelaide Ltd and Perth Ltd. All shares issued by each of the entities are ordinary shares with normal voting rights. All key facts as known to the company are provided below:

Canberra Ltd

  • Brisbane Ltd owns 40% of the issued capital.
  • The remaining shares are owned by two institutional investors who each own 30% of the issued capital.
  • All investors have rights to the net assets of Canberra Ltd. They take a keen interest in the running of the company and attend all meetings.
  • The current board of directors of Canberra Ltd has seven members.
  • Two directors on the board of Canberra Ltd are appointed by Brisbane Ltd.

Sydney Ltd

  • Brisbane Ltd owns 20% of the issued capital.
  • Perth Ltd owns 25% of the issued capital.
  • Three institutional investors equally hold 50% of the issued capital. These shareholders regularly attend meetings and vote.
  • The remaining 5% of the issued capital are owned by a geographically diverse group of investors who each hold a small parcel of shares, many of whom are unlikely to attend meetings.

Melbourne Ltd

  • Brisbane Ltd owns 35% of the issued capital.
  • Perth Ltd owns 40% of the issued capital.
  • The remaining shares are owned by a small group of investors who each own no more than 5% of the issued shares.
  • Brisbane Ltd and Perth Ltd each have two appointees on the board of directors which has five members.

Adelaide Ltd

  • Brisbane Ltd owns 50% of the issued capital.
  • Mary Ltd owns the remaining 50% of issued capital.
  • Brisbane Ltd and Mary Ltd have rights to the net assets of Adelaide Ltd.
  • The shareholders of Adelaide Ltd have a contractual agreement whereby Brisbane Ltd or Mary Ltd cannot make any operating, investing or financing decisions without the expressed consent of the other party.

Perth Ltd

  • Brisbane Ltd owns 80% of the issued capital.
  • The remaining shares are owned by a diverse group of investors who each hold a small parcel of shares.

Given the information above, the directors of Brisbane Ltd would particularly like to know:

  • the type of investment for each entity (i.e. you need to clearly identify the investor-investee relationship) including a summary of the identifying criteria and an application of this criterion;
  • the accounting method to be adopted for this type of investment

Homework Answers

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Efficiency Ltd is an existing company that previously issued 200,000 ordinary shares of $10 each and...
Efficiency Ltd is an existing company that previously issued 200,000 ordinary shares of $10 each and 25 000, 8% preference shares at $20 each. On 1 July 2019 Efficiency Ltd decided to raise additional capital via a rights issue of 1 to 5 at $10 per share for every 5 shares currently held. The current market price is $11. A total of 40,000 ordinary shares are to be offered. Applications for 40,000 shares were received by the closing date of...
Part B Bruhaha Ltd (BL) is an Australian publicly listed firm on the ASX. The company...
Part B Bruhaha Ltd (BL) is an Australian publicly listed firm on the ASX. The company has a long-term target capital structure of 50% ordinary equity, 10% preference shares, and 40% debt. All shareholders of BL are Australian residents for tax purposes. To fund a major expansion BL Ltd needs to raise a $200 million in capital from debt and equity markets. BL’s broker advises that they can sell new 10 year corporate bonds to investors for $105 with an...
Telco Ltd. is a Danish telecom company that prepares consolidated financial statements in full compliance with...
Telco Ltd. is a Danish telecom company that prepares consolidated financial statements in full compliance with IFRS 10. The company has expanded dramatically in Central Asia in recent years by investing in three units: K-Mobe, U-Mobe, and T-Mobe, supplying cellular service to customers in Kazakhstan, Uzbekistan, and Tajikistan, respectively. page 155Telco’s corporate investment policy is to take majority ownership stakes in overseas subsidiaries when possible, but to accept lower levels of ownership when majority ownership is not possible or practical....
You are the external auditor of Vila Tours Ltd, a company which promotes Vanuatu tours to...
You are the external auditor of Vila Tours Ltd, a company which promotes Vanuatu tours to Australia and New Zealand and owns a chain of duty-free shops. You have been auditing the company since it was listed on the Australian Securities Exchange 15 years ago. Although the accounts have never been qualified, you are aware that the company has been making losses for the past 4 years as a result of short-term cash flow difficulties. The company has no long-term...
1. You have been hired by the Board of Directors of firm XYZ as a part...
1. You have been hired by the Board of Directors of firm XYZ as a part of a team, tasked with the valuation of a potential acquisition target. You have collected the following publicly available information about the target company: • The common stock of the company is currently selling for an average of $40 per share. There are 6.5 million shares outstanding. The annual dividend that the company just paid was $2.60 per share. • The company has two...
Term Sheet Raising capital from the right people on the right terms with the right relationships...
Term Sheet Raising capital from the right people on the right terms with the right relationships is critical to the success of any venture. In this section, we’ll discuss deal terms and valuation. It’s a big, complicated topic, and we can’t cover all the possibilities. Our goal is to introduce some of the concepts and tools that can help you on your journey.   You should understand by now that investing in private companies is very different from buying a share...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5...
Question 7 Abu Ltd had 100,000 shares in issue, but then makes a 1 for 5 rights issue on 1 October 2017 at a price of GH¢1. The market value on the last day of quotation with rights was GH¢1.60. Total earnings are GH¢50,000 in 2017 and GH¢40,000 in 2016. Required: Calculate the Earnings per share for the year ended 31 December 2017 and the corresponding figure for 2016 in accordance with IAS 33: Earnings per share Question 5 Adom...
In 2013 senior managers at Alibaba, China’s largest e-commerce enterprise, decided that it was time to...
In 2013 senior managers at Alibaba, China’s largest e-commerce enterprise, decided that it was time to take the company public and offer its shares for sale to retail and institutional investors. Alibaba was founded in 1999 by a former English teacher, Jack Ma, with just $60,000 in capital. Often described as a fusion of Amazon and eBay, by 2013 Alibaba was already the world’s largest online e-commerce company. In 2012, transactions at its online sites totaled $248 billion, more than...
Read the attached articles about the proposed merger of Xerox and Fujifilm. Utilizing your knowledge of...
Read the attached articles about the proposed merger of Xerox and Fujifilm. Utilizing your knowledge of external and internal analysis, business and corporate strategy, and corporate governance, please discuss the following questions: 1. What is the corporate strategy behind the merger of Xerox and Fujifilm? 2. Why did Xerox agree to the merger? Is this a good deal for Xerox? Discuss the benefits and challenges they face with the merger. 3. Why did Fujifilm agree to the merger? Discuss the...
Revision Questions 1.     Non-Current Assets Provide the journal entries for the following transaction: Matthew built a...
Revision Questions 1.     Non-Current Assets Provide the journal entries for the following transaction: Matthew built a new building to store supplies for his business. The builder charged $250,000, the electrician cost $10,000 and a painter cost 5,000. A compulsory fire safety inspection was conducted and cost $1,000. Matthew is still worried about the building burning down and has purchased 12 months insurance for $10,000 which covers the value of the building in case of destruction. Matthew calculated that the above...