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On 1 September 2013, Bental entered into a business combination with another listed bank, Lental. The
business combination has taken place in two stages, which were contingent upon each other. On 1 September
2013, Bental acquired 45% of the share capital and voting rights of Lental for cash.On 1 November 2013,Lental merged with Bental and Bental issued new A-shares to Lental’s shareholders for their 55% interest.
On 31 August 2013, Bental had a market value of $70 million and Lental a market value of $90 million. Bental’s
business represents 45% and Lental’s business 55% of the total value of the combined businesses.above is the question
and is it correct to write that :-
on 1 September 2013 , bental should recognise lental as a associate rather than a subsidry because bental didnt acquire control over the lentalon 1 november 2013, Bental and Lental went into a joint arangement and this arangement is a joint venture??
did i wrote correct ?!?!?
Hm – I don’t think so. First of all, at 1 September IFRS 10 could be applicable where a 45% holding is effective control so Lental should be treated as a subsidiary. It’s possible also that the other 55% was owned by just one shareholder so it could be argued that 45% represents not even a significant influence. Further, it could be that the other 55% was owned 28% / 27% in which case the initial holding of 45% would potentially be a joint arrangement
Now, the acquisition of the remaining 55% on 1 November. You say that Bental issued shares in Bental to the former 55% holders of Lental. What, in that information, makes you think that Bental does not now hold all 100% of Lental? Surely it’s a 100% owned subsidiary.
Of course, I could be SOOOO wrong!
What does anyone else think?
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