Telco Ltd. Is a Danish telecom company that prepares consolidated financial statements in full compliance with IFRS 10. The company has expanded dramatically in Central Asia in recent years by investing in three units: K-Mobe, U-Mobe, and T-Mobe, supplying cellular service to customers in Kazakhstan, Uzbekistan, and Tajikistan respectively. Decide which of the units, if any, should be consolidated when preparing Telcos annual report. Explain your reasoning in each case.

Read the case on page 155 of the textbook and submit a Word document with your response to the question. Your response should be at least 400 words in total and written in APA format.

a. Telco owns 45 percent of the voting shares of K-Mobe. The other shares are owned by local institutions: 30 percent are owned by an investment fund connected to the state-owned oil company, and 25 percent are owned by the municipal government of Almaty, Kazakhstans largest city. The legal documents establishing K-Mobe specify that Telco possesses the right to fill a majority of the seats on K-Mobes board of directors, as well as to appoint its CEO and CFO. The agreement stipulates that the CEO be a Kazakh national. However, it contains no other restrictions covering whom Telco may appoint or the executives exercise of power once appointed. b. Telco also owns 45 percent of the voting shares of U-Mobe. The other shares are owned by local institutions: 30 percent are owned by an investment fund connected to a state-owned mining company, and 25 percent are owned by the municipal government of Tashkent, Uzbekistans capital city. The legal documents establishing U-Mobe specify that Telco possesses the right to fill 5 out of 12 seats on U-Mobes board of directors, as well as to appoint its CEO. Of the 12 seats on U-Mobes board, only 9 possess voting rights. Tashkents municipal government has been allocated 3 nonvoting seats as a mechanism to provide the board with expert opinions of key city officials. The agreement contains no restrictions covering whom Telco can appoint or on the CEOs exercise of power in the day-to-day running of the company. c. Telco owns 55 percent of the voting shares of T-Mobe and possesses the right to fill 7 out of 12 seats on T-Mobes board of directors, as well as to appoint its CEO. The other 45 percent of the voting shares are owned by Storm Bank, a large local bank that appoints T-Mobes CFO. The current CFO was a long-time employee of Storm Bank before joining T-Mobe and will return to the bank once her tenure as CFO is completed. T-Mobe relies heavily on short-term loans from Storm that must be rolled over annually. Therefore, the CFO effectively has veto authority over major policy decisions. For the past year, Storm Bank has opposed an expensive expansion program pushed by Telco and T- Mobes CEO. Recently, Storms opposition has become so strident that its five board members have stopped attending board meetings. Local laws require a quorum of nine board members to be present for board decisions to have legal validity. Lacking a quorum, T-Mobes board is not able to approve strategic decisions, such as the investment plan. Moreover, a quorum is necessary to release sufficient financial information for Telcos external auditors to carry out any audit work in relation to T-Mobes financial statements. T-Mobes short-term loans from Storm Bank contain covenants requiring it to provide audited financial statements on a regular basis.