Is 50% ownership Equity or Consolidation?

CFA Level II
#1

…guys…getting to look at a few questions now and a number of knoty isses keep coming up… what do you say about this one please?

#2

If the company has control you have to consolidate. If not, then use the equity method. It’s all about having significant influence or having control. It doens’t matter about the numbers.

#3

one more point to add: 50-50 means its a JV, and under IAS you have the option to use proportionate consolidation.

#4

thanks…do take a look, if you can, at qbank 50311 part 3, a company is acquiring approximately 50% of a co. no mention of control…schweser says …consolidation…i am inclined to say either they missed something or thewording of the question is an isse…

#5

Isn’t a joint venture only when the company and another company agree to create a new business or work together in a new business? If a company owns 50% of a company, its’ different.

#6

Montserrat’s proposed $25 million cash offer to the owners of Hometown increases Montserrat’s existing share ownership to over 50% of the company (HHI to 700 from 600). its over 50% so its consolidation. I skimmed through the Q and there isn’t anything to indicate that Montserrat’s wont have a significant influence over Hometown.

#7

I mean if the question doesn’t say if it has influence or control, I guess we should go by the numbers.

#8

CFAdummy Wrote: ------------------------------------------------------- > I mean if the question doesn’t say if it has > influence or control, I guess we should go by the > numbers. u r right when u said control significance is more important, however if they own more than 50% or 20% to that effect and they DONT mention something that indicates that the aquirer wont have control then we should assume they do have.

#9

usif… thanks for your commitment to this issue… it is good we get to the bottom of it. It is my view that in previous postings you have been clearer and more convincing see schweser 'appear to ‘contracdit’ itself again by looking at qbank Question number 47866 part 2… the issue now is if control is mentined it overides the numbers… that is fine if control is not mentioned, do we just go by the number or assume it is present somehow?