Question
Richer Ltd is owed a material amount by Pooer Partnership. Poorer is heavily in debt to Richer Ltd, but due to an unexpected economic downturn
Richer Ltd is owed a material amount by Pooer Partnership. Poorer is heavily in debt to Richer Ltd, but due to an unexpected economic downturn is unable to make repayment 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 manager its finance until the economic situation recourses. At this stage it is not perceived as nessary for Richer Ltd to be otherwise involved in the running of Poorer. Given the situation describe, what is Richer Ltd most likely to be required to do to account for Poorer under AASB127?
A. As the control achieved is only temporary, under AASB127 Richer would not be required to consolidate Poorer
B.Richer Ltd should not be required to consolidate Poorer as it does not have control as defined in AASB127
C.Richer Ltd does have temporary control of Poorer, but since Poorer is a partnership Richer is not required to included it in a consolidated set of financial statements
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started