Ralph Ltd Owns 49% of Mika Ltd and Governs the Operating

question 15

Multiple Choice

Ralph Ltd owns 49% of Mika Ltd and governs the operating decisions of Mika Ltd; but Ralph Ltd does not govern the financial decisions of Mika Ltd.Under AASB 3 Business Combinations Ralph Ltd would:

• A)not consolidate Mika Ltd because the percentage ownership is not greater then 50%
• B)consolidate Mika Ltd because Ralph Ltd governs the decision-making of Mika Ltd
• C)not consolidate Mika Ltd, because Ralph Ltd must govern decision-making over both operating and financing decisions
• D)consolidate Mika Ltd because, despite the fact that less then 50% is owned, it is highly likely that Ralph Ltd would cast a majority vote at the annual general meeting

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Definitions:

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