Emily is the accountant for Springfield Ltd. This entity has an 80% holding in the entity Lambs Ltd. A trainee working with Emily is concerned that the consolidated financial statements prepared under AASB 10 may be misleading and asks Emily why they are not allowed to prepare the consolidated financial statements showing the non-controlling interest in Springfield Ltd in a category other than equity in the statement of financial performance, and for the statement of changes in equity to show the profit numbers relating to the parent shareholders only.
Write an appropriate answer for Emily to give, covering the following issues:
1) How are prime users considered in the preparation of Consolidated Financial Statements? (limit 200 words);
2) The differences that would arise in the consolidated financial statements of Springfield Ltd if the non- controlling interests were classified as debt rather than equity (Debt vs Equity) (limit 100 words)
3) The reasons the standard setters have chosen the equity classification in AASB 10. (limit 200 words)