Joint arrangement
If an investor has joint cover the investee, it should be treated as joint arrangement. Joint control means the control is shared wth other investors and here will be a unanimous consent in decion-making
- If separate entity: joint venture (has right over the net asset) - Apply equity accounting
- If no separate entity: joint operation (has right over the asset and liability
If got agreement (contract binding), means the entity needs to follow the agreement, it is a joint control, no matter >50% (subsi)
Subsidiary
- Investor has power over the investee;
- exposure to variable returns; and
- ability to use power to affect the returns
shareholders are dispered, unlikely to collectively take action to control xxx, then is subsi
management committee is largely dominated by xxx, control exist, hence is subsi
majority vote in the AGM, is subsi
directly influence the economic decision of other investors, is subsi
potential voting rights
Exp: share option
* Need to consider if it is substantive, means:
1. currently exercisable? (means holder can exercise anytime)
2. exercise price < market value, option is “in the money”? (means cheaper than fair value, can purchase the share at cheaper price)
If both yes, then shareholding is become more, can has control
Associate
- investor has significant influence over the investee
- shareholding is between 20% - 50%
has at least one board representation in associate
