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Prepare a structured argument

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Reference no: EM131819017

Headbook Ltd has a 30% interest in the issued capital of Quickgram Pty Ltd, which is a company involved in the same industry as Headbook Ltd. The remaining 70% of the shares are owned as follows: A Ltd owns 20%, B Ltd owns 15% and C Ltd owns 35%.

Headbook Ltd holds an option to acquire all of C Ltd's shares in Quickgram Pty Ltd for $1 per share. Independent professional valuers have advised that $1 is a reasonable reflection of the market price of the shares in Quickgram Pty Ltd.

Two of the directors of Headbook Ltd are currently also appointed as directors of Quickgram Pty Ltd. One of them, Mr Head, is currently the Chairman of both Headbook Ltd and Quickgram Pty Ltd. The board of directors of Quickgram Pty Ltd has 5 seats. On 12 July 2015, a 3rd director from Headbook Ltd's board of directors, Mr Book, was appointed to the board of directors of Quickgram Pty Ltd.

There are on-going contracts between Quickgram Pty Ltd and Headbook Ltd that requires Quickgram Pty Ltd to purchase all inventory from Headbook Ltd. On 12th July 2015, Mr Book was assigned responsibility for appointing and removing the management of Quickgram Pty Ltd, and for setting their remuneration.

Quickgram Pty Ltd has been performing poorly in recent years and so the directors of Headbook Ltd are reluctant to consolidate.

Required:

You are an accounting advisor to Headbook Ltd. Prepare a structured argument (using powerpoint) advising whether Quickgram Ltd should be regarded as a subsidiary in Headbook Ltd's consolidated financial reports in accordance with AASB10.

Reference no: EM131819017

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