Ifrs 10 Application to Hyundai and Kia Free Essays

string(24) the absolute volume of 2. â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€- ACCT333 Advanced Financial Accounting â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€- Group Project Assignment (IFRS 10) Cheong Wang Shen Gordon Prepared for: Prof Bernardine Low Prepared by: Gordon Cheong Wang Shen Jason Tan Zhu En Twain Teo Wei Ren Wee Huixiang (G4) Table of Contents Question 1: IFRS 10 flowchart3 Question 25 (an) Identifying equivocalness of control5 Background5 Control issues5 Co-claiming of subsidiaries5 Inter-organization executive relations6 Same stage manufacturing6 b) (c) Application of IFRS 10 flowchart to decide presence of control by Hyundai7 Step 1: Determine the reason and plan of investee (Kia)7 Step 2: Determine pertinent activities7 Step 3: Determination of capacity to coordinate significant activities8 Step 4: Determine whenever presented to variable returns9 Step 5: Determine if Hyundai is a head or an agent10 Question 310 Identificat ion of four prerequisites in IFRS 10 that are trying to decipher and apply10 Considering the reason and structure of the investee10 Determining the overall size of casting a ballot rights11 Considering related parties12 Determining if financial specialist is a head or agent12 References14 Question 1: IFRS 10 flowchart Question 2 (an) Identifying vagueness of control Background The Hyundai Motor Company (in the future alluded to as Hyundai) is a global automaker situated in Seoul, South Korea. Hyundai is one of the two most popular divisions of the worldwide aggregate Hyundai, the other being Hyundai Heavy Industries, the biggest shipbuilder all inclusive. A celebrated Korean representative, Chung Ju-yung, established Hyundai in 1974. We will compose a custom exposition test on Ifrs 10 Application to Hyundai and Kia or then again any comparable point just for you Request Now Following the Asian Financial Crisis in 1997, Hyundai purchased over Kia Motors Corporation (in the future alluded to as Kia) in 1998, which brought about the development of the Hyundai Kia Automotive Group (HKAG). It comprises of different subsidiary organizations related through complex shareholding understandings, in spite of the fact that Hyundai is taken to be the accepted agent in exchanges finished with HKAG. During the securing of Kia in 1998, Hyundai out-bidded Ford engines to obtain 51% of the company’s shareholding. After a progression of divestments throughout the years, the all out responsibility for in Kia has been decreased to just 33. 5%. Hyundai and Kia are both recorded separately on the Korean Stock Exchange. In 2008, Hyundai was positioned the eighth biggest automaker on the planet. It was likewise the quickest developing automaker all around for 2 back to back years (2010 and 2011). The administrator and CEO of Hyundai is Chung Mong-koo, one of the endurin g children of Chung Ju-yung. Control issues Hyundai as of now has a 33. 75% direct shareholding in Kia, with the rest of the shareholdings being probably broadly scattered. All things considered, it obviously has noteworthy impact over the activities and running of Kia’s business. Be that as it may, setting up direct control among Hyundai and Kia isn't as clear. There are various issues that we need to take a gander at. Co-possessing of auxiliaries Hyundai and Kia co-own an enormous number of auxiliaries. As confirm by the 2010 combined financials of Hyundai, the worldwide parts of the Kia Motors Group are 100% held by Hyundai through Kia themselves. The two organizations likewise have rate possession in Hyundai’s different segment fabricating organizations like Hyundai HYSCO Company Limited and Hyundai Powertech Company Limited. Beside this, they likewise have possessions in Autoever Systems Corporation, where their fundamental Research and Development unit is found. Between organization chief relations The present Chairman and CEO of HMC is Chung Mong-koo. He took over Hyundai in 1992 when the Hyundai Group split into its different divisions. The Hyundai bunch itself follows a South Korean Business type of aggregate known as chaebol, where the one of a kind trademark is that it is typically a colossal family controlled corporate gathering. Accordingly, it isn't unexpected to see that a significant number of the third era individuals from Chung Ju-yung’s family are going huge numbers of the various divisions of the Hyundai Group. Chung Mong-koo’s just child, Chung Eui-sun was a key working official in different corporate arranging divisions in Hyundai-Kia before in the end heading Kia as its leader from 2005 to 2009. As of now, he is the bad habit executive of Hyundai and is on the interior top managerial staff for Kia. Beside this, Chung Mong-koo additionally has a 5% shareholding in Kia. Same stage producing Both Hyundai and Kia co-own assembling auxiliaries that produce segment parts to the two organizations. Accordingly, their creation offices get the comparable segment parts from similar providers. The organizations additionally utilize a similar force trains (motors and transmissions) all produced generally from the Hyundai Powertech Company Limited. A lion's share of the vehicle electronic segments from the two brands likewise originate from Hyundai MOBIS Limited. Both these organizations are co-possessed auxiliaries of Hyundai and Kia. Both Hyundai and Kia additionally share structure studios. Truth be told, the VP of configuration situated in HMC really regulates the plan the executives of the two brands. The family controlled heading of both Hyundai and Kia permits us to think about Hyundai having a controlling impact over Kia, particularly with Chung Eui-sun’s double situations on both companies’ directorate. Besides, given the way that the two organizations for all intents and purposes sprout from a similar gracefully chain, and power over their innovative work and structure of the vehicles are going by staff situated in Hyundai, we can see cap these income creating exercises significantly influence the business tasks of the two organizations. Despite the fact that Kia is plainly not an auxiliary from the outset, given the small 33. 75% possession by Hyundai, doubtlessly Hyundai might be applying something beyond critical impact over Kia through the different variables referenced. (b) (c) Application of IFRS 10 flowchart to decide presence of control by H yundai Step 1: Determine the reason and plan of investee (Kia) Hyundai bought shares in Kia for 1. 18 trillion won in November 1998. The motivation behind this obtaining in Kia is for Hyundai to increase critical solid footing and enlarge its piece of the overall industry in the car business. By taking over Kia Motor, the Hyundai-Kia bunch had the option to manufacture a strong position having over 70% of household piece of the overall industry and become the seventh or eighth worldwide automaker by joining its affiliates’ creation limit into the all out volume of 2. You read Ifrs 10 Application to Hyundai and Kia in class Paper models 9 million units in 1999. Stage 2: Determine pertinent exercises Activities| Does it altogether influence investees’ returns †significant exercises? | Example of choices about important activities| How choices about applicable exercises are made? Research and development| Yes| Reduce the quantity of stages to 718 before the finish of 2005, so as to spare the expenses of item advancement and assembling and produce an assortment of vehicle models having varying outer styling and inside choices for the brands of Hyundai and Kia| Decisions are made by a joint RD Division driven by the Chief Technology Officer (for Hyundai and Kia combined)| Auto-assembly| Yes| Which sort of vehicle that each plant should deliver? Regardless of whether Hyundai and Kia should share power-train parts (I. e. motor and transmission) to be provided to get together plantsWhether Hyundai and Kia should share creation technology| Decisions are made by top administration of the Hyundai-Kia gathering, where the true delegate is Hyundai| Auto parts supply| Yes| Which seller should gracefully car parts to the organizations? What number of merchants would it be advisable for them to lock in? | Decisions are made by Joint Material Handling Division that Hyundai and Kia set up| Marketing and competition| Yes| Whether to concentrate on cost or non value rivalry, for example, client care and item quality| Decisions are made by top administration of the Hyundai-Kia group| Stage 3: Determination of capacity to coordinate applicable exercises Hyundai claims 33. 75% of the offers in Kia Motors. Moreover, Chung Eui-sun, the child of the Hyundai Motor Group Chairman, possesses another 1. 73% of the offers. This probably gives Hyundai control of 35. 48% of Kia Motors, which is essentially not exactly the half shareholding that would give Hyundai most of the democratic rights. In any case, we can't discover any proof that anybody has control of a huge extent of the rest of the offers, and in this manner we feel that the presumption that the remainder of the offers in Kia are profoundly scattered is a sensible one. On the off chance that that is the situation, at that point it is practically unimaginable that every one of these investors will aggregately outvote Hyundai when a choice should be made, so Hyundai can be said to have control over the significant exercises. Another factor to consider is that Mr Chung is both the bad habit executive of Hyundai and an interior chief of Kia. As Mr Chung sits on Kia’s board, he ought to have a specific measure of impact over Kia’s dynamic procedure. This factor, combined with Hyundai’s holding of casting a ballot rights, loan a lot of weight to the case that Hyundai can coordinate the applicable exercises. To wrap things up, we notice from the table over that the Hyundai and Kia administrations together settle on most choices with respect to applicable exercises. Actually, Hyundai and Kia share nearly a similar flexibly chain. Numerous organizations in the gracefully chain are auxiliaries or partners co-claimed by these two guardians. Be that as it may, on the grounds that Hyundai possesses a bigger bit of offers, and thus casting a ballot rights, in most