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In a vertical group situation the parent controls the sub and by virtue of that control it also controls the sub sub . So in a situation were the sub holds less than 50 percent of the sub sub how should that be accounted for in the group should the group recognise sub sub as a sub or an associate
Hi,
You need to look at the overall power to direct the activities and ability to appoint the directors. This can happen, as it does in some of the examples in the class notes, whereby we have an overall effective level of control of less than 50% but still have control.
Imagine if P owns 80% of S and S owns 60% of SS. What it the effective level of control?
It is 48% (80% x 60%) but SS is still consolidated as P controls S and S controls SS.
Thanks
Chris
How would your answer change if H held 80% in S and S held 40% in ssh. Effective control of SS would be 32% so in group ss would be accounted for as an associate . Correct me if I’m wrong
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