FAC2602 Learning Unit 1 2022

FAC2602 Learning Unit 1 2022. Selected Accounting Standards And Simple Group Structures. The following is an example of such a group: 75% of the control by means of 75% of the share capital a) P Ltd is the parent. (P Ltd holds more than half of the issued share capital and it is assumed also more than half the voting rights in S Ltd.) b) S Ltd is the subsidiary. Where a parent is linked with a subsidiary to form a larger economic unit, it is customary to refer to the entity as a group. IFRS 10 Consolidated Financial Statements (issued May 2011) defines a group as a parent and all its subsidiaries. In such a group, the management of the different independent parent and subsidiary entities would coordinate their efforts on a central and unified basis to serve the interests of the group as a whole. It is possible for management to operate on a unified basis because of the control that the parent exercises over its subsidiaries. IFRS 10 determines that an investor (in this case the parent) controls an investee (the subsidiary) when the investor is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The above is an example of a simple group. Although you will only have to deal with accounting and disclosure for simple groups in this course, we would like to introduce you to the concept of complex groups so that it will not be an entirely new or foreign concept to you in future. P Ltd S Ltd 4 EXAMPLE 2 The following are two examples of complex groups: 1. a) P Ltd is the parent. b) S1 Ltd and S2 Ltd are the subsidiaries. c) P Ltd, S1 Ltd and S2 Ltd collectively form a complex group (horizontally). 2. 80% of the control through 80% of the share capital 60% of the control through 60% of the share capital P Ltd S1 Ltd S2 Ltd P Ltd 75% of the control through 75% of the share capital S1 Ltd 80% of the control through 80% of the share capital S2 Lt