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For relieving group losses we had to multiply 100% of Z plc’s shareholding in A and
Further multiplied it by 80% shareholding of A in B.
So this became one group structure because it was within 75%.
Whereas C couldn’t be within this group.
It could only be a subsidiary of B.Do we have to do the same for finding out associated companies?
Because in one of the explanation related to a question it was written
“Associated companies are those companies that are under the control of Telephone Ltd (i.e. Telephone Ltd owns, either directly or indirectly, more than 50% of the company’s ordinary share capital)”In Chapter 16, when we were doing associated companies, we did a structure of associated companies. In that
A
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80% of B 70% of C
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70% of DBut the associated companies were 4
Because the sub-subsidiary was 75% part of the Subsidiary company C. So indirectly there were included too.But do we have to do 70%*70%?
Or we can just assume that it’s an associate too?Thank you.
For associated companies, you do not multiply through the shareholdings to find the ‘effective interest’. Associated companies are determined by control only (> 50%).
So if X owns 51% of Y, which in turn owns 51% of Z, X’s effective interest in Z (51% x 51% = 26.01%) is irrelevant. Z is controlled by Y which in turn is controlled by X. X tells Y to do something, and Y has to obey, even if it’s something to do with Z, so X directly controls Y and indirectly controls Z.
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