Management comes into your office to discuss the Investment…
Management comes into your office to discuss the Investment in Mobile Co. Management: I’ve been reviewing the financial statements for the last quarter and I see this Long-Term Investment in Mobile Co. Remember our company owns 45% of the outstanding common shares of Mobile Co. I thought we are the parent company and Mobile Co. is the subsidiary, because we practice IFRS. We have a total of 45% ownership in Mobile Co. and I thought we have to consolidate them into ours. I thought we have power and control over Mobile Co. because we have the ability to significantly influence their business affairs. I thought the financial statements of both companies are to prepared as if there is only one company – ours! And I should be seeing NCI in our equity section of our balance sheet, but I don’t! I don’t understand why there are so many mistakes! Required: In two (2) or three (3) short paragraphs, what will you tell management (by answering the questions below)? 1) What does Control mean in this situation? Does this company have control over Mobile Co.? Explain. 2) Which accounting method does management believe they should be practicing under IFRS? Explain based on percentage of ownership. 3) Which accounting method should this company be practicing under IFRS? Explain based on percentage of ownership.
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