US-CN Companies & Securities Law Assignment

Liability of corporate officers for securities fraud A corporation or other business entity acts only through its agents, and so a corporation's liability for securities fraud is determined by principles of agency law. In the securities context, two agency-law concepts are relevant: respondeat superior and apparent authority. Under respondeat superior , a "master'' (employer) is liable for the torts of a "servant" (employee) done while the servant is acting within the scope of employment. However, when the servant does not act for the purpose of furthering his master's goals but is on a "frolic of his own," the master is not liable. Under the concept of apparent authority , a principal is liable when an agent acting with apparent authority makes a statement on which another relies.The agent has apparent authority when, from the perspective of third parties, it appears that the corporation has vested the agent with authority to make the...

Exercise 27.1 Acquisition analysis, acquisition date entries On 1 July 2019, Christina Ltd acquired all the issued shares of Adeline Ltd, paying $120 000 cash and transferring 100 000 of its own shares to Adeline Ltd’s former shareholders. At that date, the financial statements of Adeline Ltd showed the following information. All the assets and liabilities of Adeline Ltd were recorded at amounts equal to their fair values at the acquisition date. The fair value of Christina Ltd’s shares at acquisition date was $2 per share. Christina Ltd incurred $30 000 in acquisition‐related costs that included $5000 as share issue costs. Required 1.Prepare the acquisition analysis at 1 July 2019. 2.Prepare the journal entries for Christina Ltd to recognise the investment in Adeline Ltd at 1 July 2019. 3.Prepare the consolidation worksheet entries for Christina Ltd’s group at 1 July 2019. 1. Acquisition analysis at 1 July 2019: Net fair value of identifiable assets and liabilitie...

Joint Arrangement 1. What is a joint arrangement? A joint arrangement is an arrangement of which two or more parties have joint control. A joint arrangement has the following characteristics: (a) The parties are bound by a contractual arrangement (see paragraphs B2–B4). (b) The contractual arrangement gives two or more of those parties joint control of the arrangement (see paragraphs 7–13). A joint arrangement is either a joint operation or a joint venture. 2. What is meant by joint control? See AASB 11/IFRS 11 para 3 and Appendix A. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The key element of joint control is the sharing of control. In other words, there must be at least two investors who have shared control of the investee. 3. How does joint control differ from control as used in classifying subsidiarie...

Consolidation: other issues 1. Discuss the two types of NCI that may exist in a multiple subsidiary group structure. One feature of multiple subsidiary structures where a parent has an interest in a subsidiary that is itself a parent of another subsidiary is the need to classify the NCI ownership in the subsidiaries into direct non-controlling interest (DNCI) and indirect non-controlling interest (INCI). A DNCI exists where the NCI owns shares in a subsidiary. An INCI exists in a subsidiary where that subsidiary is owned by a partially owned subsidiary in the group. The NCI in the partially owned subsidiary is the INCI in the other subsidiary. Example: 80% 60% P Ltd A Ltd B Ltd P Ltd 80% P Ltd 48% DNCI 20% DNCI 40% INCI 12% 2. Explain the difference in the calculation of the direct and indirect N Direct NCI receives a proportionate share of all equity of the subsidiary over which it has direct ownership interest. Indirect NCI receives a proportionate...

Associates and Joint Ventures 1. What is an associate entity? Paragraph 3 of AASB 128/IAS 28 defines an associate as: • an entity over which the investor has significant influence. The key criterion is the existence of significant influence, also defined in para. 3 defined as: • The power to participate in the financial and operating policy decisions of the investee but is not control or joint control of those policies. Note that an investor does not have to necessarily hold shares in an associate – yet the application of the equity method depends on such a shareholding. However, refer to the presumptions in para 6 of AASB 128/IAS 28. 2. Why are associates distinguished from other investments held by the investor? The suite of accounting standards provides different levels of disclosure dependent on the relationship between the investor and the investee: • Subsidiaries: a control relationship (AASB 10). • Joint ventures: a joint control relationship (AASB 11). • A...

1.Briefly describe the consolidation process in the case of wholly owned entities. The consolidation process in the process through which consolidated financial statements are prepared by adding together, line by line, the financial statements of the parent and its subsidiary to some very important consolidation adjustments. First, the financial statements that are added together must be comparable. Therefore, before undertaking the consolidation process it may be necessary to make adjustments in relation to the content of the financial statements of the subsidiary. Second, as part of the consolidation process, a number of other adjustments are made to the parent’s and the subsidiary’s statements, these being expressed in the form of journal entries. A worksheet or computer spreadsheet is often used to facilitate the addition process and to make the adjustments. 2.Explain the initial adjustments that may be required before undertaking the consolidation process. Before undertaki...

Intercompany Profit Transactions—Plant Assets 1. What is the objective of eliminating the effects of intercompany sales of plant assets in preparing consolidated financial statements? The objective of eliminating the effects of intercompany sales of plant assets is to reflect plant assets and related depreciation amounts in the consolidated financial statements at cost to the consolidated entity. 2. In accounting for unrealized profits and losses from intercompany sales of plant assets, does it make any difference if the parent is the purchaser or the seller? Would your answer be different if the subsidiary were 100 percent owned? Consolidation procedures for eliminating unrealized profit on plant assets are affected by the direction of the sale. The full amount of unrealized profit or loss on downstream sales (parent to subsidiary) is charged or credited to the controlling interest. In the case of upstream sales, however, unrealized profit or loss is allocated between con...