Convincing Features
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Sakura Bhd is an importer and distributor of high-quality frozen food products for the Malaysian market. In the year 2021, the company won a 25-year contract to provide catering and related services at the Kuala Lumpur International Airport. Sakura Bhd, Itachi Bhd, and Hinata Bhd entered into an agreement to jointly control Midori Bhd. Sakura Bhd has a 38% interest in Midori Bhd.
Itachi Bhd and Hinata Bhd respectively own 32% and 30% interests in Midori Bhd. Based on the agreement, any changes to the relevant activities of Midori Bhd require at least 75% agreement from the venturers. Puan Aisyah and Encik Michael are accountants of Sakura Bhd. They contemplate applying MFRS10 Consolidated Financial Statements, MFRS11 Joint Arrangements, and MFRS128 Investments in Associates and Joint Ventures in preparing the group financial statements.
Disagreement arises when Puan Aisyah proposes to apply the acquisition method in accordance with MFRS 10 for the investment in Midori Bhd as Sakura Bhd owns the majority interest in Midori Bhd meanwhile Encik Michael advises applying the equity method under MFRS 128.
Discuss your opinion on Puan Aisyah and Encik Michael’s views related to the above issue with reference to the relevant MFRSs.
Apart from acquiring enough ordinary shares in the investee company, discuss two (2) other ways to control an investee company.
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