1. NZ IFRS 10 requires entity P to consolidate entity S if P controls S and prov
ID: 2452906 • Letter: 1
Question
1. NZ IFRS 10 requires entity P to consolidate entity S if P controls S and provides guidelines for control which are not based on majority ownership by the investor. Using the Conceptual Framework, identify one advantage and one disadvantage of the current rule.
2. Identify one advantage and one disadvantage of majority ownership criterion of control.
3. Currently consolidated net income includes the shares of both the parent and the non-controlling interest and is allocated between these two. Previously, net income attributable to the non-controlling interest was shown as a deduction in arriving at the consolidated net income. Why has this change been made?
Explanation / Answer
Advantage & Disadvantage if consolidation is not based on majority ownership by the investor.
Advantages => Minority can take management decissions with minority in case of emergencies, they need not to ask majority for the decission as in minority decission can be taken faster as compare to majority as in majority they need to pass resolution.
Disadvantages => Minority holds less equity shares and have less voting rights as compare to majority so cant take major decissions on its own.
2.one advantage and one disadvantage of majority ownership criterion of control
.Advantage => Majority holds major shares have more voting rights and can take decission in favour when ever they want. They are the real owners of a company
Disadvantage=> When ever any litigation arises, its majority who is laible to answer , majority have to face each and every litifation, disputes, major issues etc.
3. Change has been made because of an AMMENDMENT OF ARB NO. 51
This Statement results in more transparent reporting of the net income attributable to the noncontrolling interest.
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