Headbook Ltd has a 30% interest in the issued capital of Quickgram Pty Ltd, which is a

company involved in the same industry as Headbook Ltd. The remaining 70% of the

shares are owned as follows: A Ltd owns 20%, B Ltd owns 15% and C Ltd owns 35%.

Headbook Ltd holds an option to acquire all of C Ltds shares in Quickgram Pty Ltd for

$1 per share. Independent professional valuers have advised that $1 is a reasonable

reflection of the market price of the shares in Quickgram Pty Ltd.

Two of the directors of Headbook Ltd are currently also appointed as directors of

Quickgram Pty Ltd. One of them, Mr Head, is currently the Chairman of both Headbook

Ltd and Quickgram Pty Ltd. The board of directors of Quickgram Pty Ltd has 5 seats. On

12 July 2015, a 3rd director from Headbook Ltds board of directors, Mr Book, was

appointed to the board of directors of Quickgram Pty Ltd.

There are on-going contracts between Quickgram Pty Ltd and Headbook Ltd that requires

Quickgram Pty Ltd to purchase all inventory from Headbook Ltd. On 12th July 2015, Mr

Book was assigned responsibility for appointing and removing the management of

Quickgram Pty Ltd, and for setting their remuneration.

Quickgram Pty Ltd has been performing poorly in recent years and so the directors of

Headbook Ltd are reluctant to consolidate.

Required:

You are an accounting advisor to Headbook Ltd. Prepare a structured argument (using

powerpoint) advising whether Quickgram Ltd should be regarded as a subsidiary in

Headbook Ltds consolidated financial reports in accordance with AASB10.