Companies Acorn and Magex form a company Cane, to tender for a public contract with a government to construct a highway between two cities. Acorn and Magex have joint control of the activities of Cane. Acorn will construct three bridges needed to cross rivers on the route; Magex will construct all of the other elements of the highway.
Acorn and Magex will each use their own equipment and employees in the construction activity. Cane enters into a contract with the government for delivery of the highway. It also enters into a contract with Acorn and Magex for performance of the government contract. Acorn and Magex will invoice Cane for their respective shares of the total amount invoiced by Cane to the government.
Required
Discuss the nature and the reporting of this arrangement by Acorn company.