Traffic Management Holdings Ltd (TMHL), a public company, commenced trading in 2001. TMHL has investments in a number of partly and wholly owned subsidiaries and a diverse shareholder group including original owners, self-managed superannuation funds, and other sophisticated investors. TMHL Group achieved turnover of $100 million last financial year (FY19 ended 30 June 2019), has gross assets of $62m and employs over 1,000 employees across Australia and New Zealand. Debt within the company is provided by way of debentures issued to the public and also through one of the major four Australian banks. During the course of this financial year, FY20 ending 30 June 2020, the company has pursued a strategic growth strategy undertaking a number of investments. The Directors of TMHL have decided to change audit firms and have approached your audit and advisory firm to undertake the audit and to seek initial advice on how to account for the investments they have made during the FY20 financial year. All shares and units issued by each of the entities are ordinary shares or units with normal voting rights. All key facts as known to the company in relation to the investments made are provided on the following page:

New Zealand TMS Ltd Traffic Management Holdings Ltd, through its 55% owned New Zealand subsidiary, owned 30% of the issued capital at the beginning of this financial year. During the course of this financial year the discussions between the other two shareholders in New Zealand TMS Ltd and TMHL resulted in a deal whereby TMHL directly would, on 31 December acquire a 36% interest (18% from each of the two shareholders) in New Zealand TMS Ltd. The remaining 34% of the shares are to be retained by the two founding shareholders who each own 17% of the issued capital. They are employees of the company and have a keen interest in the running of the company and attend all meetings. The board of directors of New Zealand TMS Ltd has five members. Under the new arrangements three directors on the board of New Zealand TMS Ltd will be appointed by Traffic Management Holdings Ltd. The other two seats are to be held by the founding shareholders of New Zealand TMS Ltd.

TMS Victoria Pty Ltd The company was formed during the financial year in response to winning a joint tender for all Victorian State and Local Government road work traffic management services. Traffic Management Holdings Ltd owns 20% of the issued capital. Australian Road Constructions Ltd owns 20% of the issued capital. Two institutional infrastructure investors equally hold 50% of the issued capital. These shareholders regularly attend meetings and vote. The remaining 10% of the issued capital is owned by a small number of materials supply companies each holding a small parcel of shares. These shareholders are unlikely to attend shareholder meetings.

TM Products Traffic Management Holdings Ltd contributed 50% to a new venture to produce traffic management products including safety vests, traffic management signage and cones. Australian TM Products Pty Ltd contributed the manufacturing facility and existing relationships and staffing representing the other 50% of the value of the new venture. Traffic Management Holdings Ltd and Australian TM Products Pty Ltd will share the manufactured products produced by the new venture and sell them to their own customers. Each of the parties will own a 50% interest in all the ventures individual assets and obligation for the ventures liabilities. The new venture contractual agreement signed by both parties stipulates neither Traffic Management Holdings Ltd nor Australian TM Products Pty Ltd can make any operating, investing or financing decisions without the expressed consent of the other party.

Traffic Control Training Services Unit Trust Traffic Management Holdings Ltd, through a wholly owned subsidiary, owns 40% of the issued units. The remaining units are owned by two large education training institutions, one operating out of Queensland and the other in New South Wales and Victoria. Each of the training institutions are involved in presenting traffic control training services to TMHL employees and other companies and own 30% of the issued units. All investors have rights to the net assets of Traffic Control Training Services Unit Trust. The current board of directors of the corporate trustee, Traffic Control Training Services Pty Ltd, the Trustee for the Traffic Control Training Services Unit Trust, has five members. One director on the board is appointed by Traffic Management Holdings Ltd. The other directors are appointed by the two institutional investors.

Given the information above, the directors of Traffic Management Holdings Ltd would particularly like to know:

does AASB 3 Business Combinations, AASB 10 Consolidated Financial Statements and/or AASB 128 Investments in Associates and Joint Ventures apply to the Traffic Management Holdings Ltd Group in the FY20 financial year

the type of investment for each entity identified above (i.e. you need to clearly identify the investor-investee relationship(s)) including a summary of the identifying criteria and an application of this criterion;

the accounting method(s) to be adopted for each investment identified above during the financial year1; and

which entities, if any, would form part of the Traffic Management Holdings Ltd Group.

As a consultant, you are required to give a business-oriented presentation for the directors of Traffic Management Holdings Ltd to explain the way in which Traffic Management Holdings Ltd would account for its investments made during the financial year.

You must justify your conclusions with suitable referencing to the relevant Australian Accounting Standards. Your presentation should include any assumptions made and is to clearly identify what, if any, additional information Traffic Management Holdings Ltd would need to make a final determination if there is any uncertainty.