Reference no: EM133002801

X Inc. has 40% voting rights on investee. The other two investors (Y and Z) each hold 28% of investee voting rights. The remaining voting rights are held by two other shareholders, each own 2%. X Inc. and other investors have exposure to variable returns on investee.

Other information related to ownership in investee is described in the following 2 independent situations:

1. X Inc. also has a derivative contract to acquire an additional 20% share in the investee, which comes from the transfer of ownership from Y Inc. and Z Inc. each 10% ownership.
The settlement date of the derivative contract is within a period of 20 days. X Inc will change a policy on a relevant activity, but requires the approval of a majority vote in the Extraordinary General Meeting Of Shareholder. Current shareholders cannot change the current policy on relevant activities as the Extraordinary General Meeting Of Shareholder can be held as early as 25 days later.

2. The shareholder agreement gives X Inc the right to appoint, remove, and establish the remuneration of management who responsible for directing relevant activities. To change the agreement, it takes a 3/4 (three-fourths) majority vote in an Extraordinary General Meeting Of Shareholder held as early as 25 days later.

Problem 1: In each of the above independent mutual situations, determine whether:

a) X currently has control over the investee. Please explain the reason for the answer.
b) X has control over the investee at a later date. Please explain the reason for the answer.
c) X has no control over the investee. Please explain the reason for the answer.