ACC-1A Lecture Notes - Lecture 28: Book Value, Vertical Integration
Document Summary
Where investor x has control over entity y, x is a parent entity and y is the subsidiary entity. The combination of x and y is the economic entity. Control is power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Owning over 50% of the shares of a company. Investor has the capacity to dominate the composition of the board or the capacity to control the majority of votes cast at a meeting or the bod/general meeting. Investor may have less than 50% but the ownership of the remaining shares is widely dispersed. Where control exists, consolidation is used to represent the parent company and all its subsidiary as one economic entity. Thought to represent the economic and business circumstances more faithfully than reporting separately. Reasons for inter-corporate investments companies" side by side. Enter new markets through established companies in those areas. Obtain competitive advantages (horizontal & vertical integration)
