Wayne Simthson, the fianc director of Bill Ltd, is unsure whether... Wayne Simthson, the fianc director of Bill Ltd, is unsure whether he should consolidate some of the company's investments. He has asked your advice as a business adviser to Bill Ltd. The details of the investments are as follows: Gill and Tony Girth are founders of Creamy Eats, an up-market French home delivery company. They both sit on the board and own 60 per cent of the shares. They have recently retired from actively running the company and have sold the other 40 per cent of the shares to Bill Ltd, who manages the company on their behalf, holding the other three seats on the board. Although Gill and Tony keep a close eye on the business, they let Bill Ltd make the major decisions. Get Rich App Ltd (GRAL) is partly funded by Bill Ltd L, which owns 50% of the shares, and where Your Money Ltd (WYML), the other 50%. The votes of the ordinary shares in the annual general meetings and the board representation are shared equally between Bill Ltd and WYML. WYML and Bill Ltd have agreed that Bill Ltd will provide the finance on a standard commercial basis, with the loan being secured by a mortgage on GRAL's property. The agreement also stipulates that WYML will provide the necessary managerial and entrepreneurial expertise in return for a management fee. The management fee will be paid out of GRAL's net profits after providing for all Bill Ltd's loan interest payments. Where GRAL does not profit, interest payments will still take place, but no management fee will be paid. Bill Ltd had loaned Gambler Ltd (GL) some years ago. When it looked as if GL could not repay the loan, it was converted into equity, giving Bill Ltd a 70% holding in GL. GL has a substantial accumulated losses balance, and the company's results have been consolidated with Bill Ltd for some time. Bill Ltd does not take an active role in the day-to-day operations of GL as it has no directors on board, and it takes no part in the operating or financing decisions of the company. Bill Ltd has also provided a loan to Draw A Long Bow Company Ltd (DALBCL). Unfortunately, due to the COVID-19 industrial economic downturn, DALBCL has failed to meet its loan repayments as required by the loan contract. The board o directors of Bill Ltd is concerned that not only would DALBCL continue to have problems but also that the whole of the loan would become unrecoverable. The board of DALBCL has agreed, as part of a bailout package, that Bill Ltd would take charge of DALBCL's finances for the next four years. The Bill Ltd deputy chief finance officer would control all payments made by DALBCL, and no payments would be made without prior approval. Bill Ltd does not have board representation on DALBCL, appointed by the DALBCL shareholders. REQUIRED: Prepare a report advising Wayne Smithson: how the control requirements of AASB 10 apply in each of the above investments. State, for each investment, where the control rests, citing and explaining how the relevant paragraphs of AASB10 apply, and whether Adam should include the results of the investments within the consolidated accounts explaining the reasons for your decision. [16 marks] The report should take the format of a formal business report written by your firm with you as the lead author. Must include: (a) Title (To whom is the report addressed), (b) Executive Summary, (c) Introduction, (d) Each situation dealt with, (e) Conclusion, and (f) Referenc

ChatGPT

Title: Control Requirements of AASB 10 and Consolidation Decision: Report for Wayne Smithson, Finance Director of Bill Ltd

To: Wayne Smithson, Finance Director of Bill Ltd From: [Your Name] Date: [Current Date]

Executive Summary: This report provides an analysis of the control requirements outlined in AASB 10 (Australian Accounting Standards Board 10) for each of the investments held by Bill Ltd. The report examines the control relationships and ownership structures in the following investments: Creamy Eats, Get Rich App Ltd (GRAL), Gambler Ltd (GL), and Draw A Long Bow Company Ltd (DALBCL). It also provides recommendations on whether the results of these investments should be included in the consolidated accounts of Bill Ltd. Based on the analysis, our conclusion is presented, taking into account the specific provisions of AASB 10.

Introduction: The purpose of this report is to address the control requirements stipulated in AASB 10 for each investment and guide you on whether to include the results of these investments within the consolidated accounts of Bill Ltd. We will evaluate the control relationships and relevant provisions of AASB 10 to provide comprehensive advice.

Control Requirements and Consolidation Analysis:

1. Creamy Eats: Creamy Eats is an up-market French home delivery company in which Bill Ltd owns 40% of the shares, with the remaining 60% owned by Gill and Tony Girth, who are retired and no longer actively involved in managing the company. According to AASB 10, control exists when an investor has the power to direct the relevant activities of an investee. Additionally, an investor must have exposure or rights to variable returns and the ability to affect those returns through its power over the investee.

In this case, although Gill and Tony Girth still hold the majority of shares, Bill Ltd manages the company on their behalf and holds three seats on the board, allowing it to make major decisions. Therefore, Bill Ltd has control over Creamy Eats based on its power to direct relevant activities. Consequently, the results of Creamy Eats should be included in the consolidated accounts of Bill Ltd.

1. Get Rich App Ltd (GRAL): Bill Ltd and Your Money Ltd (WYML) jointly own GRAL, with each holding 50% of the shares. AASB 10 requires assessing whether an investor has power, exposure or rights to variable returns, and the ability to affect those returns. In this case, the votes and board representation are shared equally between Bill Ltd and WYML, signifying shared control.

Bill Ltd provides finance to GRAL on commercial terms, secured by a mortgage, while WYML provides managerial and entrepreneurial expertise in exchange for a management fee. The management fee is paid out of GRAL's net profits, and interest payments to Bill Ltd are mandatory. Given the shared control arrangement and the interdependent nature of the agreements, Bill Ltd should include the results of GRAL within its consolidated accounts.

1. Gambler Ltd (GL): Bill Ltd acquired a 70% holding in GL after converting a loan into equity. However, Bill Ltd does not have any board representation or involvement in the day-to-day operations or financing decisions of GL. AASB 10 defines control as having power over an investee. As Bill Ltd lacks power over GL and does not actively participate in its operations, it does not have control over GL as per the provisions of AASB 10.

Therefore, the results of GL should not be included in the consolidated accounts of Bill Ltd. Instead, it should be recognized as an associate or joint venture, depending on the nature of the relationship and the applicable accounting standards.

1. Draw A Long Bow Company Ltd (DALBCL): DAL

Wayne Simthson, the fianc director of Bill Ltd, is unsure whether he should consolidate some of the company's investments. He has asked your advice as a business adviser to Bill Ltd. The details of the investments are as follows: (a) Gill and Tony Girth are founders of Creamy Eats, an up-market French home delivery company. They both sit on the board and own 60 per cent of the shares. They have recently retired from actively running the company and have sold the other 40 per cent of the shares to Bill Ltd, who manages the company on their behalf, holding the other three seats on the board. Although Gill and Tony keep a close eye on the business, they let Bill Ltd make the major decisions. [250 words] (b) Get Rich App Ltd (GRAL) is partly funded by Bill Ltd L, which owns 50% of the shares, and where Your Money Ltd (WYML), the other 50%. The votes of the ordinary shares in the annual general meetings and the board representation are shared equally between Bill Ltd and WYML. WYML and Bill Ltd have agreed that Bill Ltd will provide the finance on a standard commercial basis, with the loan being secured by a mortgage on GRALs property. The agreement also stipulates that WYML will provide the necessary managerial and entrepreneurial expertise in return for a management fee. The management fee will be paid out of GRALs net profits after providing for all Bill Ltds loan interest payments. Where GRAL does not profit, interest payments will still take place, but no management fee will be paid. [250 words] (c) Bill Ltd had loaned Gambler Ltd (GL) some years ago. When it looked as if GL could not repay the loan, it was converted into equity, giving Bill Ltd a 70% holding in GL. GL has a substantial accumulated losses balance, and the companys results have been consolidated with Bill Ltd for some time. Bill Ltd does not take an active role in the day-to-day operations of GL as it has no directors on board, and it takes no part in the operating or financing decisions of the company. [250 words] (d) Bill Ltd has also provided a loan to Draw A Long Bow Company Ltd (DALBCL). Unfortunately, due to the COVID-19 industrial economic downturn, DALBCL has failed to meet its loan repayments as required by the loan contract. The board o directors of Bill Ltd is concerned that not only would DALBCL continue to have problems but also that the whole of the loan would become unrecoverable. The board of DALBCL has agreed, as part of a bailout package, that Bill Ltd would take charge of DALBCLs finances for the next four years. The Bill Ltd deputy chief finance officer would control all payments made by DALBCL, and no payments would be made without prior approval. Bill Ltd does not have board representation on DALBCL, appointed by the DALBCL shareholders. [250 words] REQUIRED: Write a report to Wayne Simthson: advising him how the control requirements of AASB 10 apply in each of the above investments. State, for each investment, where the control rests, citing and explaining how the relevant paragraphs of AASB10 apply, and whether Adam should include the results of the investments within the consolidated accounts explaining the reasons for your decision. [16 marks] The report should take the format of a formal business report written by your firm with you as the lead author. Marks will be awarded for presentation style and an appropriate business format. Note: report must include: (a) Title (To whom is the report addressed), (b) Executive Summary, (c) Introduction, (d) Each situation dealt with, (e) Conclusion, and (f) Reference. [6 Marks]