Question
5. Richer Ltd is owed a material amount by Poorer Partnership. Poorer is heavily in debt to Richer Ltd, but due to an unexpected economic
5. Richer Ltd is owed a material amount by Poorer Partnership. Poorer is heavily in debt to Richer Ltd, but due to an unexpected economic downturn is unable to make repayments according to schedule. The board of Richer Ltd believes that Poorer has a good chance of trading out of its current economic difficulties as its management and product are sound and the current problems stem from external factors that are expected to pass within the next 12 to 18 months. Richer Ltd enters into an arrangement with Poorer to manage its finances until the economic situation reverses. At this stage it is not perceived as necessary for Richer Ltd to be otherwise involved in the running of Poorer. Given the situation described, what is Richer Ltd most likely to be required to do to account for Poorer under AASB 10?
A. As the control achieved is only temporary, under AASB 10 Richer would not be required to consolidate Poorer. B. Richer Ltd should consolidate Poorer under AASB 10 because it has control over it by the definition of 'control' in AASB. C. Richer Ltd should not be required to consolidate Poorer as it does not have control as defined in AASB 10. D. Richer Ltd does have temporary control of Poorer, but since Poorer is a partnership Richer is not required to include it in a consolidated set of financial statements.
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