Indirect Group structure
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Indirect Group structure
There are 2 approaches in dealing with Indirect group structure.
E.g. H --70%-->A --60%-->B
One is the approach suggested by Billy, which is seperately account for:
First A-->B,
Then H-->A.
Another approach which is far more complicated was used by CLP in practice question no.1, it account for:
1. H--42%-->B
2. H--70%-->A
To my understanding, 2 approaches will give different result on consolidation.
Any one know which approach to adopt?
Feel free to discuss.
E.g. H --70%-->A --60%-->B
One is the approach suggested by Billy, which is seperately account for:
First A-->B,
Then H-->A.
Another approach which is far more complicated was used by CLP in practice question no.1, it account for:
1. H--42%-->B
2. H--70%-->A
To my understanding, 2 approaches will give different result on consolidation.
Any one know which approach to adopt?
Feel free to discuss.
Lam Fai- Posts : 26
Join date : 2008-12-05
Age : 38
Location : Kwun Tong
Re: Indirect Group structure
I guess we should use billy's approach.
As actually P does not hv control over B (only 42%), I think it is not appropriate to account for the interests in B directly.
Correct me if I am wrong.
As actually P does not hv control over B (only 42%), I think it is not appropriate to account for the interests in B directly.
Correct me if I am wrong.
kipeggy- Posts : 15
Join date : 2008-12-05
Age : 38
Location : Lok Fu
Re: Indirect Group structure
kipeggy wrote:I guess we should use billy's approach.
As actually P does not hv control over B (only 42%), I think it is not appropriate to account for the interests in B directly.
Correct me if I am wrong.
having control and having interest are different as suggested by Billy.
Since P has 100% control over A (>50% equity interest over A is presumed to have control), it should be deemed to have 100% control in B also.
Kay- Admin
- Posts : 34
Join date : 2008-12-05
Age : 39
Location : Shatin
Re: Indirect Group structure
Lam Fai wrote:There are 2 approaches in dealing with Indirect group structure.
E.g. H --70%-->A --60%-->B
One is the approach suggested by Billy, which is seperately account for:
First A-->B,
Then H-->A.
Another approach which is far more complicated was used by CLP in practice question no.1, it account for:
1. H--42%-->B
2. H--70%-->A
To my understanding, 2 approaches will give different result on consolidation.
Any one know which approach to adopt?
Feel free to discuss.
Billy's approach is easier...
Kay- Admin
- Posts : 34
Join date : 2008-12-05
Age : 39
Location : Shatin
Re: Indirect Group structure
H exerts control over B.
Although the effective interest is only 42%.
This is specially addressed in Billy's class and CLP.
CLP 21.8.1 about NCI hv a clear interpretation as follows,
It is possible that a parent has control over a subsi w/o majority ownership of shares.
E.g. H--70%-->A--60%-->B
It is because H has 100% control over A, since A controls B, H has control over B.
Although the effective interest is only 42%.
This is specially addressed in Billy's class and CLP.
CLP 21.8.1 about NCI hv a clear interpretation as follows,
It is possible that a parent has control over a subsi w/o majority ownership of shares.
E.g. H--70%-->A--60%-->B
It is because H has 100% control over A, since A controls B, H has control over B.
Lam Fai- Posts : 26
Join date : 2008-12-05
Age : 38
Location : Kwun Tong
Re: Indirect Group structure
Thanks for correcting me~
I remember during the workshop, my facilators also teach us to use billy's approach when discussing the unseen question.
I remember during the workshop, my facilators also teach us to use billy's approach when discussing the unseen question.
kipeggy- Posts : 15
Join date : 2008-12-05
Age : 38
Location : Lok Fu
Re: Indirect Group structure
Although i also think that Billy's approach is more convenience...
CLP never uses it...
They insist to use effective interest approach, with adjustment on indirect holding of Sub-Subsidary...
Another simple example is Example 7 of CLP 21.
It makes sense to me that there is some different in nature, if a Parent (H) invest in a Subsi (A), whose NCI shares part of the Investment in a Sub-Subsi (B).
Since NCI do share part of A's investment in B, thus effective interest approach will more appropriately dealing in this area, and so as the resulting effect on GW.
CLP never uses it...
They insist to use effective interest approach, with adjustment on indirect holding of Sub-Subsidary...
Another simple example is Example 7 of CLP 21.
It makes sense to me that there is some different in nature, if a Parent (H) invest in a Subsi (A), whose NCI shares part of the Investment in a Sub-Subsi (B).
Since NCI do share part of A's investment in B, thus effective interest approach will more appropriately dealing in this area, and so as the resulting effect on GW.
Lam Fai- Posts : 26
Join date : 2008-12-05
Age : 38
Location : Kwun Tong
QP Deloitte :: QP :: QP Q&A Section :: MA
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