Logan Ltd. has acquired, during the current year, the following investments in the shares issued by other companies:
Jarislowsky Corp. ......... $120,000 (40% of issued capital)
Murray Inc. ............. $117,000 (35% of issued capital)
Logan is unsure how to account for these investments and has asked you, as the auditor, for some professional advice.
Specifically, Logan is concerned that it may need to prepare consolidated financial statements under IFRS 10. To help you, the company has provided the following information about the two investee companies: Jarislowsky
• The remaining shares in Jarislowsky are owned by a diverse group of investors who each hold a small parcel of shares.
• Historically, only a small number of the shareholders attend the general meetings or question the actions of the directors.
• Logan has nominated three new directors and expects that they will be appointed at the next annual general meeting. The current board of directors has five members.
Murray
• The remaining shares in Murray are owned by a small group of investors who each own approximately 15% of the issued shares. One of these shareholders is Jarislowsky, which owns 17%.
• The shareholders take a keen interest in the running of the company and attend all meetings.
• Two of the shareholders, including Jarislowsky, already have representatives on the board of directors who have indicated their intention of nominating for re-election.
Required
(a) Advise Logan as to whether, under IFRS 10, it controls Jarislowsky and/or Murray. Support your conclusion.
(b) Would your conclusion be different if the remaining shares in Jarislowsky were owned by three institutional investors each holding 20%? If so, why?