Inter-Corp Investments Question 2010, companies, declared, company

zbird2134

You own 50% of company X which is deemed to be a significant influence. Your companies NI is 75M. Company X's NI is 68M and declared 22M in dividends. IFRS rules apply.


What is your company's NI?

a) 75M
b) 98M
c) 109M
d) 143M



Edited 1 time(s). Last edit at Friday, May 7, 2010 at 12:06PM by TreasExmnr.

ninja1024

right, % ownership is a GUIDELINE, actual INFLUENCE VS CONTROL dictates what to do.

So if i'm at say 15% ownership, but i have board representation and have influence, i'd still do equity method...

Pegasus2008

It must be 109.

50% = joint control = proportionate consolidation OR equity method under IFRS, but proportionate consolidate is preferred.

Doesnt really matter, because either way gives you the same net income

jarobi04

it say significant influence .. so method used will be equity method only...
in that case we would have 109 the correct answer..



Edited 1 time(s). Last edit at Friday, May 7, 2010 at 12:56PM by YAhmed.

benbenxiong

soddy1979 Wrote:
-------------------------------------------------------
> I'm going to say 143, 50% is joint control which
> equals consolidation under US GAAP.
>
> Although it could be 109 under IFRS.


keep in mind, under US GAAP, 50% = joint control = equity method under US GAAP. Consolidation would be >50%

MiniMe7

C - 109

But also remember not to get too bogged down on the actual percentage of ownership (i.e. 50%, etc.). The book stresses its the companies INFLUENCE not necessarilly the percentage of ownership that determines the accounting method to be used.

Its possible to have less than 50% ownership and still be required to use consolidation

profil

equity method applies.

$75 + $68(.5) = 109

dividends are reflected in balance sheet account

jacksparrow

I was thinking the answer was (b) because dividends are treated as a return on your investment. The book answer is (c). Am I just confusing NI with change in the balance sheet account?