Case Study 9: Parent-subsidiary relationship (AASB10)
In the following independent situations, determine whether a parent–subsidiary relationship exists and which entity, if any, is a parent.
1. Tom Ltd and Toots Ltd each hold 50% of the shares in Jerry Ltd, all companies being involved in the computer software industry. Tom Ltd agrees that Toots Ltd should provide the management of Jerry Ltd because of the expertise provided by its managing director, Bob Gates. Toots Ltd receives a management fee for providing its expertise.
2. Spike Ltd has recently acquired a 35% interest in Tyke Ltd, a company that has discovered
large deposits of iron ore. Spike Ltd has extensive experience in the mining industry and, as a
result, has been able to have four of its directors elected to the board of Tyke Ltd, which has
six directors in total.
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