Aasb in the Case of Great Tools Essay

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AASB

In the case of Great Tools Ltd., GGG still has control over the subsidiary. As such the parent company retains the right to upgrade the overall property, plant and equipment of the Great Tools Ltd. Within the AASB standards, the paragraphs regarding control are very clean. The standards specify the reason and methods in which an investor can initiate control over an investee. In addition, the statute also discusses how these requirements are determined. For instance, paragraphs 6 indicates the investors control an investee when is has the ability to materially affect the overall returns of the investee through its power. This could include exposure and involvement in the overall returns of the investee. As the case illustrates, GGG owns 70% of Great Tools Ltd. Therefore, GGG, has the undisputed ownership of the subsidiary due to its overall exposure and its power over the actual investee (AASB releases new Code of Ethics, 2009).

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This situation is unique due primarily to the dual relationship between the bank and the parent company. In this instance, neither Greater Tools Ltd., nor HSBC can take sole ownership of the subsidiary. Instead, as the AASB standards indicate, both parties have collective control of the subsidiary. This is due to a litany of reasons. First, Electric Lawnmowers can not act without the overall consistent of the bank due to prior arrangements. Likewise, Electric Lawnmower is owned primarily Greater Tools. Although Greater Tools Ltd. has a 55% stake in the subsidiary, it can not exercise full control of operations without the consent of the bank. As such both parties must work collectively to achieve the desire financial results. Due to the banks heavy restrictions placed on Electric Lawnmower, the company can not change operations without consent. To complicate….....

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