Please can I get assistance answering this question, it due today at 12noon please
Question 2.5 Presented below are questions relating to a variety of different investors and investees: a) Penny purchased 70% of the equity shares and related voting rights) in Swamp. This entitled Penny to direct the relevant activities of Swamp. In terms of an agreement reached with the other shareholders in Swamp, Penny is entitled to a fixed level of dividends regardless of the level of profitability of Swamp. Discuss if Penny exerts control over Swamp. b) Post has the ability, through contractual agreement, to elect 6 of the 10 directors on Shame's Board of Directors. This includes the Chairman of Shame. The current financial year of Shame has been disastrous with Shame recording its biggest accounting losses since it was incorporated. Market analysts blame the Chairman's poor decisions for the disappointing results. The financial director is not prepared to consolidate Shame into the results of Post. He justifies his argument by stating that IFRS 10.15 requires there to be a return criterion present in determining if Post directs the relevant activities of Shame. Since Shame is incurring losses, he argues that Post does not need to consolidate Shame since Post does not exert control over Shame. Discuss if the Post's financial director is correct. c) Prim acquired 100% of the equity shares (and voting rights) in Storm. Tornado is a company that is 20% owned by Storm and Hurricane is a company that is 80% owned by Tornado. Prim and Tornado are listed on the Johannesburg Stock Exchange, whilst Storm and Hurricane are both private companies. The equity shares and debentures of both Storm and Hurricane are privately held and are not open to the public. Storm is able to direct the relevant activities of Tornado through the existence of an agreement that was reached with Tornado's many other shareholders. Groups: Graded Questions Introduction to control and consolidation Tornado is a company that holds investments in many investees with the purpose of earning capital appreciation returns to its shareholders. All of Tornado's investees are measured at fair value through profit or loss. Hurricane is a company that provides Tornado with real time financial market information that is used by Tornado to earn capital appreciation returns for its shareholders. Discuss if any of the companies mentioned above are required to prepare consolidated financial statements. d) Pose created an entity called Smart and transferred buildings and research facilities to Smart. This transfer was structured in such a way that 90% of the value of the assets transferred was repayable to Pose in the future and only 10% represented an equity interest. Other parties also contributed funds to Smart to the extent that Pose only holds 5% of the voting rights in Smart. Pose directs the research activities of Smart, intending for Smart to find ways of creating environmentally friendly fuels. Smart may sell its research to other companies after it has been allowed to do so by Pose (who would otherwise use the research for its own benefit). From time to time, Pose will advance funds to Smart for it continue its research these loans will be subordinated to loans obtained from banks and other institutions). Discuss whether Pose controls Smart. You are required to make reference to IFRS 10 and IFRS 12 in answering this
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