Page 21 - Topic 1 - 1. Consolidated & Separate Financial Statement

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Illustration 3

• Does Q Ltd have power over M Ltd?

• Power over M Ltd comes from the voting rights, as these direct the
relevant activities

• The convertible debentures represent potential voting rights, as
they would give Q Ltd further voting rights in M Ltd

• Even though the debentures are slightly out of the money, their
conversion would result in significant synergies and would therefore

still benefit Q Ltd

• Thus, the debentures are substantive, if they are convertible at the

time when decisions regarding relevant activities are made

• Q Ltd considers the debentures to determine that it controls a

majority of the voting rights (65%)

• Therefore, Q Ltd has power over M Ltd

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