which it is entitled, within 2 months of its year end or if Space's current debt equity ratio doubles within the 3 years. Invincible Ltd.'s Chief Operations Officer (COO) will coordinate the launch of the product, its manufacture and sales as soon as the license is registered Dynamic Ltd's staff will assist with on-going legal and compliance work in respect of the registration of the license but will not be involved in the selling of the product. Profits are expected to be low for the first 3 years of operations and the 60% profit sharing ratio for 3 years is likely to equate to the fees that Dynamic Ltd would normally charge for its services. Required: Draft a memorandum to the Audit Committee explaining to the 2 companies referred to above should be treated in the group financial statements. While it is not necessary to explain the process involved in consolidating, equity accounting etc., it is necessary to include what % of the group profits will be included in the group financial statements. Your Memo should deal with the nature of the investment and the type of accounting for the investment that would be appropriate in the group financial statements. If you determine that an entity is a subsidiary briefly state the extent to which any NCI would be attributed a share of the total comprehensive income when companies should be equity accounted, the % of the investee's profits that should be equity accounted as well as the group's effective interest should be discussed. If consolidation is required effective interest should be calculated. You are not required to deal with disclosure. (20) ARE 1871 ASSIGNMENTI I MARKS) ANSWER ALL QUESTIONS QUESTION I (IFRS 10 IAS 28) Invincible L a company registered in this is at the early stages of producing group financial statements. The company's first Audit Committee meeting to discuss the financial statements is scheduled for in a few weeks time and you have been asked to prepare a paper for present the meeting to discuss the appropriate basis for ac ting for entities mention helow: Waka Lad: Wala Ind's relevant activities are directed by ordinary shareholders votes Invincible na controlling of the shares in Cresta Lad. Crest L o s 45% of the shares in Wakaland Invincible owns a further 20% of Waka Lad. The remaining shares in Waka Lid we held by an cmpowerment group that also owns a golden share. The polden share entities the empowerment group to veto any decisions made by one at the shareholders meetings. The Audit Committee has specifically asked what the effect of the golden share is de what treatment would be both with the golden share and suming that the golden share did not exist Spare PyLad: Invincible Ld has recently designed a very powerful telescope that it plans to target at the astronomy market. In order to launch m a ture and sell the product it incorporated Space Ply L (Space with a capital injection of S10m. before being launched sold the right to sell the Telescope is required to be registered under a license so that only holders of the license and these authorized to sell under the license can sell these telescopes Registration of telescope license is a very specialized area of law and such Invincible Led partnered with Dynamic Led that specializes in registering licenses to sell newly developed Telescopes. Although registering the license is a formality for Dynamic UN given its highly experienced stall, Dynamic Lad's director nepotted that the shares of Space's aferax pe l profits for the first 3 years of Space's per with Invincible sharing in the other profits for the first years and 100 thereafter stes of the agreement for the r ing of Space's operaties Dynamic Lad's staff will register the license in its n ame after 3 years Space will have the option to buy the ice from D o rastplated Space has unconditional right to sell the telescope under Dynamic L i me for the first years of operation, les Space does not pay D iether post Page 1 of 1 which it is entitled, within 2 months of its year end or if Space's current debt equity ratio doubles within the 3 years. Invincible Ltd.'s Chief Operations Officer (COO) will coordinate the launch of the product, its manufacture and sales as soon as the license is registered. Dynamic Ltd's staff will assist with on-going legal and compliance work in respect of the registration of the license but will not be involved in the selling of the product. Profits are expected to be low for the first 3 years of operations and the 60% profit sharing ratio for 3 years is likely to equate to the fees that Dynamic Ltd would normally charge for its services. Required: Draft a memorandum to the Audit Committee explaining to the 2 companies referred to above should be treated in the group financial statements. While it is not necessary to explain the process involved in consolidating, equity accounting etc., it is necessary to include what% of the group profits will be included in the group financial statements. Your Memo should deal with the nature of the investment and the type of accounting for the investment that would be appropriate in the group financial statements. If you determine that an entity is a subsidiary briefly state the extent to which any NCI would be attributed a share of the total comprehensive income when companies should be equity accounted, the % of the investee's profits that should be equity accounted as well as the group's effective interest should be discussed. If consolidation is required effective interest should be calculated. You are not required to deal with disclosure. (20) which it is entitled, within 2 months of its year end or if Space's current debt equity ratio doubles within the 3 years. Invincible Ltd.'s Chief Operations Officer (COO) will coordinate the launch of the product, its manufacture and sales as soon as the license is registered Dynamic Ltd's staff will assist with on-going legal and compliance work in respect of the registration of the license but will not be involved in the selling of the product. Profits are expected to be low for the first 3 years of operations and the 60% profit sharing ratio for 3 years is likely to equate to the fees that Dynamic Ltd would normally charge for its services. Required: Draft a memorandum to the Audit Committee explaining to the 2 companies referred to above should be treated in the group financial statements. While it is not necessary to explain the process involved in consolidating, equity accounting etc., it is necessary to include what % of the group profits will be included in the group financial statements. Your Memo should deal with the nature of the investment and the type of accounting for the investment that would be appropriate in the group financial statements. If you determine that an entity is a subsidiary briefly state the extent to which any NCI would be attributed a share of the total comprehensive income when companies should be equity accounted, the % of the investee's profits that should be equity accounted as well as the group's effective interest should be discussed. If consolidation is required effective interest should be calculated. You are not required to deal with disclosure. (20) ARE 1871 ASSIGNMENTI I MARKS) ANSWER ALL QUESTIONS QUESTION I (IFRS 10 IAS 28) Invincible L a company registered in this is at the early stages of producing group financial statements. The company's first Audit Committee meeting to discuss the financial statements is scheduled for in a few weeks time and you have been asked to prepare a paper for present the meeting to discuss the appropriate basis for ac ting for entities mention helow: Waka Lad: Wala Ind's relevant activities are directed by ordinary shareholders votes Invincible na controlling of the shares in Cresta Lad. Crest L o s 45% of the shares in Wakaland Invincible owns a further 20% of Waka Lad. The remaining shares in Waka Lid we held by an cmpowerment group that also owns a golden share. The polden share entities the empowerment group to veto any decisions made by one at the shareholders meetings. The Audit Committee has specifically asked what the effect of the golden share is de what treatment would be both with the golden share and suming that the golden share did not exist Spare PyLad: Invincible Ld has recently designed a very powerful telescope that it plans to target at the astronomy market. In order to launch m a ture and sell the product it incorporated Space Ply L (Space with a capital injection of S10m. before being launched sold the right to sell the Telescope is required to be registered under a license so that only holders of the license and these authorized to sell under the license can sell these telescopes Registration of telescope license is a very specialized area of law and such Invincible Led partnered with Dynamic Led that specializes in registering licenses to sell newly developed Telescopes. Although registering the license is a formality for Dynamic UN given its highly experienced stall, Dynamic Lad's director nepotted that the shares of Space's aferax pe l profits for the first 3 years of Space's per with Invincible sharing in the other profits for the first years and 100 thereafter stes of the agreement for the r ing of Space's operaties Dynamic Lad's staff will register the license in its n ame after 3 years Space will have the option to buy the ice from D o rastplated Space has unconditional right to sell the telescope under Dynamic L i me for the first years of operation, les Space does not pay D iether post Page 1 of 1 which it is entitled, within 2 months of its year end or if Space's current debt equity ratio doubles within the 3 years. Invincible Ltd.'s Chief Operations Officer (COO) will coordinate the launch of the product, its manufacture and sales as soon as the license is registered. Dynamic Ltd's staff will assist with on-going legal and compliance work in respect of the registration of the license but will not be involved in the selling of the product. Profits are expected to be low for the first 3 years of operations and the 60% profit sharing ratio for 3 years is likely to equate to the fees that Dynamic Ltd would normally charge for its services. Required: Draft a memorandum to the Audit Committee explaining to the 2 companies referred to above should be treated in the group financial statements. While it is not necessary to explain the process involved in consolidating, equity accounting etc., it is necessary to include what% of the group profits will be included in the group financial statements. Your Memo should deal with the nature of the investment and the type of accounting for the investment that would be appropriate in the group financial statements. If you determine that an entity is a subsidiary briefly state the extent to which any NCI would be attributed a share of the total comprehensive income when companies should be equity accounted, the % of the investee's profits that should be equity accounted as well as the group's effective interest should be discussed. If consolidation is required effective interest should be calculated. You are not required to deal with disclosure. (20)