Application Of AASB 10 In Consolidating Financial Statements: Analysis Of Control Requirements In Four Investments

Investment in Struggle Ltd (SL)

The meaning of control provides comprehensive supervision so that a solitary regulator exemplary can be practically applies to all entities. The project was urbanized partially to report apparent discrepancies between IAS 27 and SIC 12, and to boost junction by way of US GAAP. The report gives advice to Billy Handy, the finance director of Northern Australia Global Investment Ltd (NAGIL), for consolidating his investments. (AASB and C.A.S. 2014).

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Part A

In the Para 4 of AASB 10, NAGIL is holding 70% of the shares of SL. Ltd. It is not tangled in the administration of SL, non-controlling interest appoints the director for SL. Control is not based upon actual control but it is based on capacity. NAGIL is opened to variety of returns such as dividends that is earned through the ownership of shares, through the ownership of shares, it has powers over investees, and it has the capacity to change the returns as it has the right to be involve in the management according to its wish through the superior voting rights. ( Lyandres and Zhdanov 2014).

NAGIL is the parent company and it should prepare consolidated financial statement as per AASB10.

Part B

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The control exists in the hands of VBCL. In AASB10, paragraph B40 it is specified under rights from supplementary contractual arrangements that it provides the investor a right for show the way for the activities that are applicable as it has rights quantified in the contract, which is sufficient to straight the activities related to intended and maneuvers of the company. Therefore, if there is no other right is present pecuniary necessity of an investee on the investor concerning relationship on a supplier and major clients does not primary to the investor having control over the investee. SL will not be a subsidiary of NAGIL because the bank is not visible to variety of returns from the participation with SL. Revenue earned by SL. does not affect the interest expenditures. It cannot use its power over SL to change the figures of yields, as the yields are fixed interest outflows.

Some of the relevant actions over which a parent should have power include determination of funding structure, obtaining funds, processing , researching and developing of new products, disposing, selecting and acquiring of assets, purchasing and selling of services and goods.

Part C

In AASB 10, para 39 it was stated that the contractual agreement held between SPL and NAGIL gives the sufficient right to exercise its voting power. Even if the agreement do not provide the sufficient power to direct, other vote holders that they enable others about the terms of voting to reach out to a decision about the activities those are relevant.

Investment in Very Big Company Ltd (VBCL)

In para B40, it states that the right of voting with the right of other decision-making gives SPL and NAGIL the power to direct the activities those are relevant. This right gives to direct the activities that are related to operations and monetary as this prominently affects the investee`s return. The power lies in the hands of NAGIL and SPL regarding MSCL. Ltd.

From Para`s B68 to B70 states regarding the payment of remuneration. The highest the scale of, and inconsistency associated with, the result maker’s remuneration comparative to the returns predictable from the events of the investee, the additional possible the judgment maker is a main. In defining whether it is a major or a mediator the conclusion maker shall also deliberate whether the subsequent situations exist: that the remuneration of the judgment maker is corresponding with the facilities provided. The remuneration contract includes only rapports, situations or quantities that are usually present in preparations for similar amenities and side-by-side of assistances discussed on an arm’s length basis. (GUPTA 2014).

Part D

In AASB 10, power is termed as the existing right given for directing the relevant activities through current ability. Relevant activities are termed as those activities of the investee that expressively affects the investee`s return. If the actions of Tom and Marjory Legless both affects the return of investee`s then it is essential to determine the actions such as development and obtaining of standing orders approval to supervise he major affected return of the investee. For determining the reason of affection The elements that determine the margin of profit, value and proceeds of the investee as well as the value of adventure, revelation to the varieties of return, designing and fortitude if the investee and the outcome on the investee`s return ensuing from each investor`s verdict making. (Howieson 2013).

In this particular situation the investor would contemplate the ambiguity of, and determination mandatory in obtaining regulatory sanction in view of the investor`s record of effective evolving and procurement the controlling sanction of  journey and which depositor control the adventure trips once the expansion phase is over.

Bill should show the investments in the consolidated financial statement.


In this report applicability of ASSB 10 in different cases of consolidating the financial statements have been discussed while taking four different situations. The aim of the report is to advice Bill to include the investments in its consolidated financial report.


AASB, C.A.S., 2014. Financial Instruments. Project Summary.

GUPTA, M.S., 2014. External Commercial Borrowing: Quest in India. International Journal of Multidisciplinary Approach & Studies, 1(4).

Howieson, B., 2013. Defining the Reporting Entity in the Not?for?Profit Public Sector: Implementation Issues Associated with the Control Test. Australian Accounting Review, 23(1), pp.29-42.

Juhmani, O.I., 2013. Ownership structure and corporate voluntary disclosure: Evidence from Bahrain. International Journal of Accounting and Financial Reporting, 3(2), pp.133-148.

Minton, B.A., Taillard, J.P. and Williamson, R., 2014. Financial expertise of the board, risk taking, and performance: Evidence from bank holding companies. Journal of Financial and Quantitative Analysis, 49(2), pp.351-380.

Müller, V.O., 2014. The impact of IFRS adoption on the quality of consolidated financial reporting. Procedia-Social and Behavioral Sciences, 109, pp.976-982.

Pacter, P., 2014. Global accounting standards-From Vision to reality. The CPA Journal, 84(1), p.6.

Lyandres, E. and Zhdanov, A., 2014. Convertible debt and investment timing. Journal of Corporate Finance, 24, pp.21-37.