Case Study 13: Entities required to prepare consolidated financial statements (AASB10)

In the following independent situations, discuss which entity, if any, may be a parent required to prepare consolidated financial statements under AASB 10/IFRS 10.

1. Edgar Ltd owns 100% of the shares of Lin Ltd, which owns 80% of the shares of Zhang Ltd. All companies prepare their own financial reports under AASB/IFRS accounting standards. Lin Ltd does not have debt or equity instruments traded in a public market, nor does it intend to issue any.

2. Butch Ltd holds 30% of the shares issued by Toodles Ltd. The other shareholders come from mixed backgrounds, but each holds on average 10% of shares in Toodles Ltd. Only three of the other shareholders have an interest in the management of the company. There are seven directors of Toodles Ltd. Four of these are appointed by Butch Ltd. The other three directors are appointed by the three other shareholders who have an interest in the management of the company. Most of the remaining shareholders live outside Australia and rarely attend general meetings of Toodles Ltd unless they have other business to attend to in the country around the same time as the general meetings are held.