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Fill also jointly controls coal mines with other entities. The Theta mine is owned by four participants. Fill owns 28%, and the other three participants each own 24% of the mine. The operating agreement requires any major decisions to be approved by parties representing 72% of the interest in the mine. Fill is considering purchasing one of the participant’s interests of 24%.
The directors of Fill wish advice on whether the proposed revision to the Conceptual Framework will affect the decision as to whether Fill controls the mine.
The directors are also wondering whether the acquisition of the interest would be considered a business combination under IFRS Standards.Is this arrangement a joint operation?
I don’t think this was ever a joint operation. The exam answers seemed to wander around saying that it might be a joint operation because it was described as joint control. In the last sentence they make the important point that you only have joint control if all parties have a right of veto.
So on balance I think it was never a joint operation.
The focus of this question was really about what happened afterwards in terms of whether the investment would be considered a business combination.
“The Theta mine is owned by four participants.”
Does that indicate its a joint venture?
answer didn’t conclude anything. In article ” read the mind of marker” Part 2 examiner just write this ”
Note 9
Two marks given for the correct explanation that the 72% ownership does not give control, and the conclusion that this means that the transaction would not lead to the mine being fully consolidated by Fill.”Ownership by four participants does not make it a joint arrangement. There must be evidence of a right of veto.
But the focus of the question was to determine whether the company was a subsidiary.
so in such type of questions we don’t need to give conclusive answers.. just analyze it in different ways and then close it.
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