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Dagga Inc. is a Canadian public company that cultivates and harvests cannabis plants and sells cannabis products into the Canadian recreational and medical markets. Bhang

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Dagga Inc. is a Canadian public company that cultivates and harvests cannabis plants and sells cannabis products into the Canadian recreational and medical markets. Bhang Inc. is a Canadian public company that dries and cures harvested cannabis buds and processes it into cannabis products. The following information is relevant to the two companies: Bhang Inc. has 25 million common shares and 2 million convertible debentures outstanding. Each debenture can be converted into 1 common share. Dagga Inc. owns 3.125 million common shares of Bhang Inc. and owns all of the convertible debentures of Bhang Inc. The Chief Operational Officer of Dagga Inc., Mary-Jane Jimbo, is a member of the board of directors of Bhang Inc. The two companies signed a \"tolling\" agreement in 2017 whereby Bhang Inc. would dry and cure all of Dagga Inc.'s harvested cannabis plants (raw materials) and process it into a final product that can be sold to the nal consumer. Dagga Inc. kept ownership of the raw materials and final product throughout the process and paid Bhang Inc. a fee for its services. On July 1, 2019, the two companies agreed to cancel the tolling agreement. During the period July 1 to December 31, 2019, Dagga Inc. sold raw materials to Bhang Inc. for $12 million. Bhang Inc. processed the raw materials into a final cannabis product (the same way as it did under the tolling agreement) and sold it to Dagga Inc. for $20 million, who in turn sold the final product for $22 million in 2020. Dagga Inc. recorded revenue of $35 million in 2019. Bhang Inc. recorded revenue of $32.5 million in 2019, consists of tolling fees of $8 million and sale of cannabis products of $24.5 million (it also sold to companies other than Dagga Inc). Dagga Inc. uses FVTOCI [fair value through other comprehensive income) to account for its investment in Bhang Inc. Both companies have a December 31 year-end. REQUIRED: a. Explain in detail how Dagga Inc. should classify its investment in Bhang Inc. by referring to IFS 10 Consolidated Financial Statements and/or IAS28 Investments in Associates and Joint 1ventures, as applicable. Explain in detail how Dagga Inc. should account for the transactions with Bhang Inc. in its 2019 financial statements. What should Dagga Inc. disclose regarding its transactions with Bhang Inc. under IFRSB Operating Segments? Why? Comment on the quality of earnings of Dagga Inc. for 2019

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