Ifrs 10 Application to Hyundai and Kia Free Essays

string(24) the all out 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 structure of investee (Kia)7 Step 2: Determine significant activities7 Step 3: Determination of capacity to coordinate pertinent activities8 Step 4: Determine whenever presented to variable returns9 Step 5: Determine if Hyundai is a head or an agent10 Question 310 Identi fication of four prerequisites in IFRS 10 that are trying to decipher and apply10 Considering the reason and plan of the investee10 Determining the overall size of casting a ballot rights11 Considering related parties12 Determining if speculator is a head or agent12 References14 Question 1: IFRS 10 flowchart Question 2 (an) Identifying uncertainty of control Background The Hyundai Motor Company (from now on alluded to as Hyundai) is a worldwide 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 around. A well known Korean representative, Chung Ju-yung, established Hyundai in 1974. We will compose a custom article test on Ifrs 10 Application to Hyundai and Kia or on the other hand any comparable theme 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 arrangement of the Hyundai Kia Automotive Group (HKAG). It comprises of numerous associated organizations related through complex shareholding understandings, in spite of the fact that Hyundai is taken to be the true delegate in exchanges finished with HKAG. During the procurement of Kia in 1998, Hyundai out-bidded Ford engines to gain 51% of the company’s shareholding. After a progression of divestments throughout the years, the complete responsibility for in Kia has been decreased to just 33. 5%. Hyundai and Kia are both recorded independently on the Korean Stock Exchange. In 2008, Hyundai was positioned the eighth biggest automaker on the planet. It was additionally the quickest developing automaker all inclusive for 2 continuous years (2010 and 2011). The director and CEO of Hyundai is Chung Mong-koo, one of the endu ring children of Chung Ju-yung. Control issues Hyundai presently has a 33. 75% direct shareholding in Kia, with the rest of the shareholdings being apparently broadly scattered. In that capacity, it clearly has critical impact over the tasks and running of Kia’s business. In any case, 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-claiming of auxiliaries Hyundai and Kia co-own countless auxiliaries. As confirm by the 2010 solidified financials of Hyundai, the worldwide parts of the Kia Motors Group are 100% held by Hyundai through Kia themselves. The two organizations additionally have rate possession in Hyundai’s different segment producing organizations like Hyundai HYSCO Company Limited and Hyundai Powertech Company Limited. Beside this, they likewise have possessions in Autoever Systems Corporation, where their principle Research and Development unit is found. Between organization executive 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 extraordinary trademark is that it is normally a colossal family controlled corporate gathering. All things considered, it isn't unexpected to see that a significant number of the third era individuals from Chung Ju-yung’s family are going a considerable lot 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. At present, he is the bad habit administrator of Hyundai and is on the interior governing body for Kia. Beside this, Chung Mong-koo likewise has a 5% shareholding in Kia. Same stage fabricating Both Hyundai and Kia co-own assembling auxiliaries that produce segment parts to the two organizations. Thus, their creation offices get the comparative segment parts from similar providers. The organizations likewise utilize a similar force trains (motors and transmissions) all fabricated to a great extent from the Hyundai Powertech Company Limited. A larger part of the vehicle electronic segments from the two brands additionally originate from Hyundai MOBIS Limited. Both these organizations are co-claimed auxiliaries of Hyundai and Kia. Both Hyundai and Kia additionally share structure studios. Truth be told, the VP of configuration situated in HMC really supervises the structure the board 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’ governing body. Moreover, given the way that the two organizations for all intents and purposes sprout from a similar gracefully chain, and command 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 activities of the two organizations. Despite the fact that Kia is plainly not an auxiliary from the start, given the pitiful 33. 75% proprietorship by Hyundai, doubtlessly Hyundai might be applying something other than huge impact over Kia through the different elements referenced. (b) (c) Application of IFRS 10 flowchart to decide presence of control by Hyundai 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 securing in Kia is for Hyundai to increase huge a dependable balance and enlarge its piece of the pie in the vehicle business. By taking over Kia Motor, the Hyundai-Kia bunch had the option to fashion a strong position having over 70% of residential 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 classification Article models 9 million units in 1999. Stage 2: Determine important exercises Activities| Does it altogether influence investees’ returns †pertinent exercises? | Example of choices about pertinent 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 contrasting o utside 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 accepted agent is Hyundai| Auto parts supply| Yes| Which seller should flexibly vehicle parts to the organizations? What number of merchants would it be a good idea 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 assistance and item quality| Decisions are made by top administration of the Hyundai-Kia group| Stage 3: Determination of capacity to coordinate significant exercises Hyundai claims 33. 75% of the offers in Kia Motors. Also, Chung Eui-sun, the child of the Hyundai Motor Group Chairman, claims another 1. 73% of the offers. This apparently gives Hyundai control of 35. 48% of Kia Motors, which is fundamentally not exactly the half shareholding that would give Hyundai most of the democratic rights. Notwithstanding, we can't discover any proof that anybody has control of an enormous extent of the rest of the offers, and accordingly we feel that the suspicion that the remainder of the offers in Kia are exceptionally scattered is a sensible one. In the event that that is the situation, at that point it is practically incomprehensible that every one of these investors will all in all 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 inner 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 pertinent 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. Truth be told, Hyundai and Kia share nearly a similar gracefully chain. Numerous organizations in the gracefully chain are auxiliaries or partners co-claimed by these two guardians. Nonetheless, in light of the fact that Hyundai claims a bigger segment of offers, and subsequently casting a ballot rights, in most