The following exercise needs to be answered according to Australian Accounting Standards Board legislation and must contain between 800-1000 words.
You are working as an accountant for Balfour Rose Bryant and the senior partner has asked you to prepare a report answering the following questions about consolidation procedures for a client:
Beda Ltd has a 28% interest in the share capital of Haven Ltd, which is a company involved in the same industry as Beda Ltd. The remaining share capital is owned by Mr and Mrs Wournos who are the founders of Haven Ltd. Mr and Mrs Wournos have given Beda Ltd three out of five seats available on the board of directors. Beda Ltd takes the lead on all decisions but the business is closely monitored by Mr and Mrs Wournos who hold the other two board positions.
Advise the directors of Beda Ltd of the requirements of AASB 127 in respect of the control criterion and how they would apply to this investment.
Why is it necessary to make adjustments for intra-group transactions?
As the majority of the directors do not have an accounting background, your report answering the questions must be written to convey a clear understanding of consolidation accounting concepts (control vs significant influence) and other relevant accounting issues.