Toby Ltd sells half of its interest to Coco Ltd and buys call options from Coco Ltd
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Toby Ltd sells half of its interest to Coco Ltd and buys call options from Coco Ltd

Case Study 6: Options (AASB10)

Toby Ltd and Fred Ltd own 80% and 20% respectively of the ordinary shares that carry voting rights at a general meeting of shareholders of Stella Ltd. Toby Ltd sells half of its interest to Coco Ltd and buys call options from Coco Ltd that are exercisable at any time at a premium to the market price when issued and, if exercised, would give Toby Ltd its original 80% ownership interest and voting rights. At the end of the current financial period, the options are out of the money.

Required

Discuss whether Toby Ltd is the parent of Stella Ltd.

Hint
Business Toby Ltd owns the majority rights over Fred Ltd. Toby ownership is 80% while Fred Ltd owns 20%. Fred Ltd has the voting rights of Stella Ltd. This means that Fred Ltd is the parent company of Stella Ltd. The parent-subsidiary relationship maintains different brand identities....

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