Question

Ithaca Corporation owns significant amounts of common stock in 3 Canadian corporations. The following table describes these investments: Other Significant Investors Maple Leaf Inc Frozen Hockey Products Elsa and Anna's Ice Cream % of Common Stock Owned by Ithaca 85% 35% 40% None Gretzky Co owns 51% of Frozen's stock SnowBank owns 20% of Elsa and Anna's stock Representation on the boards of directors of Gretzky Co and SnowBank is proportional to common stock ownership. This is not the case at Elsa and Anna's. Ithaca has appointed 5 of the 8 members of the Board of Directors, all of which who have voting rights. When preparing consolidated financial statements, which of these investments would Ithaca consolidate under IFRS? O All three entities Elsa and Anna's Ice Cream only Maple Leaf Inc and Anna and Elsa's Ice Cream Maple Leaf Inc only

Answer 1

Maple Leaf Inc and Elsa's Ice cream because of the following reasons:

An investor controls an investee if and only if the investor has all of the following elements:

• power over the investee, i.e. the investor has existing rights that give it the ability to direct the relevant activities (the activities that significantly affect the investee's returns)
• exposure, or rights, to variable returns from its involvement with the investee
• the ability to use its power over the investee to affect the amount of the investor's returns.