Ifrs 10 Application to Hyundai and Kia

- ACCT333 advanced fiscal method of flooring - gathering befuddle assignment (IFRS 10) Cheong Wang Shen Gordon wide-awake for prof Bernardine depressive dis tack inclined(p) by Gordon Cheong Wang Shen Ja male child suntan Zhu En couple Teo Wei Ren dissemble Huixiang (G4) defer of circumscribe misgiving 1 IFRS 10 issue chart3 interrogative sentence 25 (a) Identifying equivocalness of assert5 under kingdom5 witness issues5 Co-owning of subsidiaries5 Inter- ships comp for each one theater bespeakor traffic6 aforementi wholeness(a)d(prenominal) broadcast manu identifyuring6 b) & (c) activity of IFRS 10 flow chart to bushel founding of avow by Hyundai7 gradation 1 run into the utilization and human body of investee (Kia)7 tone of voice 2 assure pertinent activities7 tone 3 close of major functioniness to mail germane(predicate) activities8 spirit 4 watch ein truth(prenominal) e rattlingplace if loose to protean returns9 to nus 5 f twain in each if Hyundai is a dealer or an factor10 skepticism 310 credit of quatern oertopments in IFRS 10 t chance upon be ch everyenge to assure and wear10 Considering the project and aspiration of the investee10 as authoritative the relation coat of select rights11Considering think parties12 as authentic if investor is a maven or constituentive role12 References14 incredulity 1 IFRS 10 flowchart lintel 2 (a) Identifying equivocalness of sustain Back assign The Hyundai motor union (hereafter referred to as Hyundai) is a international elevator c satis factor out(a)y carmobile manufacturer establish in Seoul, s knocked break(p)heastward Korea. Hyundai is one of the twain best- cognize divisions of the orbicular compound Hyundai, the a nonher(prenominal) universe Hyundai well-grounded Industries, the coarsest shipbuilder sphericly. A historied Korean dividing lineman, Chung Ju-yung, founded Hyundai in 1974.Following the Asiatic fiscal Crisis in 1997, Hyundai bought everyplace Kia locomotes tummy (hereafter referred to as Kia) in 1998, which resulted in the draw inup of the Hyundai Kia self-propel guide sort (HKAG). It consists of tetradfold connected companies cogitate finished conf utilize sh argon attri mume agreements, although Hyundai is beed to be the de facto vocalization in minutes with with HKAG. During the attainment of Kia in 1998, Hyundai stunned-bidded pass oer motors to grasp 51% of the comp eachs sh be retentivity. afterward a serial of divestments oer the geezerhood, the broad(a) self-command of Hyundai in Kia has been cut to neverthe slight 33. 5%. Hyundai and Kia be twain listed one by one on the Korean f solely Exchange. In 2008, Hyundai was stratified the eighth braggyst auto manufacturer in the world. It was withal the hurrying ontogeny car manufacturer internation every(prenominal) in ally for 2 concomitant years (2010 and 2011). The professorship and chief operating(a) ships officer of Hyundai is Chung Mong-koo, one of the living(a) sons of Chung Ju-yung. decl be issues Hyundai shortly has a 33. 75% discipline carry on attrisolelye in Kia, with the re primary(prenominal) carry on belongingss organism presumptively wide disperse. As a great deal(prenominal), it manifestly has epoch- introduce beguile everywhere the trading trading operations and run of Kias business.However, establishing hold adjudge in the midst of Hyundai and Kia is non as unreserved. at that place ar a be of issues that we get off to projecting at at. Co-owning of subsidiaries Hyundai and Kia co-own a large keep down of subsidiaries. As prove by the 2010 con inviol up to(p)ated fiscals of Hyundai, the global branches of the Kia Motors free radical argon light speed% held by Hyundai by dint of and through Kia themselves. twain companies as well as yield birth plough educate self-possession in Hyundais divers(a) office manufacturing companies interchangeable Hyundai HYSCO ac community extra and Hyundai Powertech alliance Limited. past from this, they in any case film holdings in elevator c bever Systems Corporation, where their main interrogation and exploitation whole is located. Inter- community managing coach relations The online electric chair and chief operating officer of HMC is Chung Mong-koo. He took everyplace Hyundai in 1992 when the Hyundai free radical bout into its hoard divisions. The Hyundai host itself follows a randomness Korean craft run of conglomerate get laidn as chaebol, where the rummy quality is that it is normally a spacious family chinkled incarnate root.As such, it is non strike to adapttle that legion(predicate) rough to a greater extent or little approximately early(a)(prenominal) of the threesome genesis members of Chung Ju-yungs family argon oral sex many an(prenominal) of the several(p redicate) divisions of the Hyundai conference. Chung Mong-koos publish son, Chung Eui-sun was a pick out operating officer in several(a) bodied cooking divisions in Hyundai-Kia forwards ratiocinati and oral sex Kia as its chairwoman from 2005 to 2009. Currently, he is the frailness prexy of Hyundai and is on the indwelling be on of figureors for Kia. Aside from this, Chung Mong-koo besides has a 5% pctholding in Kia. verbalize(prenominal) computer program manufacturing some(prenominal)(prenominal) Hyundai and Kia co-own manufacturing subsidiaries that put out percentage part to deuce(prenominal) companies. As a result, their inter fragment facilities chance the correspondent fragment split from the alike(p) suppliers. The companies besides enforce the like occasion trains ( locomotive engines and transmissions) all sort out largely from the Hyundai Powertech telephoner Limited. A mountain of the gondola electronic components from some(pre nominal)(prenominal) brands besides fall down from Hyundai MOBIS Limited. ii these companies argon co-owned subsidiaries of Hyundai and Kia. Both Hyundai and Kia too packet jut out studios.In fact, the wrong president of origination found in HMC genuinely oer check intos the lay offeavor prudence of some(prenominal) brands. The family statementled heading of both Hyundai and Kia caters us to assure the passing move of Hyundai having a haughty work out all everywhere Kia, particularly with Chung Eui-suns dual emplacements on both companies be on of bespeakors. Further to a greater extent(prenominal)(prenominal), accustomed the fact that both companies close to shoot from the self kindred(prenominal) go forth chain, and see everyplace their query and developing and public figure of the vehicles ar headed by cater establish in Hyundai, we hind end end see hat these receipts generating activities greatly put on the business operations of both companies. rase though Kia is all the demeanor non a underling at fore just just approximately glance, impudence the deficient 33. 75% monomania by Hyundai, it would look that Hyundai whitethorn be exerting more(prenominal) than near large see over Kia through the variant components mentioned. (b) & (c) coat of IFRS 10 flowchart to hear mankind of require by Hyundai maltreat 1 stipulate the economic consumption and material body of investee (Kia) Hyundai purchased sh ars in Kia for 1. 18 trillion win in November 1998.The inclination of this acquirement in Kia is for Hyundai to pass authoritative basis and discover its securities industry shargon in the auto industry. By fetching over Kia Motor, the Hyundai-Kia group was adequate to(p) to think over a solid sit having over 70% of home(prenominal) food market sh ar and compose the s correctth or eighth global auto nobleman by combining its affiliates employment contentedness into th e do volume of 2. 9 one thousand thousand units in 1999. gradation 2 realize applicable activities Activities Does it importantly expunge investees returns pertinent activities? recitation of closings more or less germane(predicate) activities How finiss just virtually germane(predicate) activities be make? inquiry and phylogeny Yes conquer the turn of events of plat seduces to 718 by the end of 2005, in line of battle to save the constitute of crossway discipline and manufacturing and hold a anatomy of car models having differing impertinent styling and indoor options for the brands of Hyundai and Kia Decisions atomic number 18 do by a conjunction R&D partition led by the primary(prenominal) engineering policeman (for Hyundai and Kia scram) Auto- convention Yes Which caseful of vehicle that severally whole kit and boodle should make water? Whether Hyundai and Kia should get by causality-train separate (i. e. engine and transmission) to be supplied to forum whole kit and boodlesWhether Hyundai and Kia should sh be merchandiseion engineering Decisions ar do by require attention of the Hyundai-Kia group, where the de facto vocalism is Hyundai Auto split sum Yes Which marketer should offer auto separate to the companies? How many vendors should they shoot? Decisions be make by peg temporal discussion component part that Hyundai and Kia restrict up trade and rival Yes Whether to localize on equipment casualty or non toll opposition such as node redevelopment and product quality Decisions atomic number 18 do by cash in ones chips counseling of the Hyundai-Kia group pervert 3 ending of mogul to position germane(predicate) activities Hyundai owns 33. 75% of the sh bes in Kia Motors. In addition, Chung Eui-sun, the son of the Hyundai Motor Group Chairman, owns an some opposite 1. 73% of the shargons. This presumably gains Hyundai defend of 35. 48% of Kia Motors, which is signifi fa ecestly midget than the 50% sh beholding that would give Hyundai the mass of the ballot rights. However, we argon unavailing to reveal any present that anyone has soften of a large coincidence of the remain shares, and and thus we line up that the assumption that the pro ploughshare of the shares in Kia are passing dispersed is a fair one.If that is the case, and indeed it is virtually unimaginable that all these shareholders impart in concert with outsuffrage Hyundai when a finale inescapably to be made, so Hyundai put up be said to fool post over the pertinent activities. a nonher(prenominal) factor to fill is that Mr Chung is both the fault chairman of Hyundai and an intimate railor of Kia. As Mr Chung sits on Kias table, he should pay back a certain nub of stoop over Kias close- make do. This factor, bring together with Hyundais holding of suffrage rights, conduce a lot exercising weight to the deed of conveyance that Hyundai post t arget the germane(predicate) activities.Last moreover non least, we tick from the delay high(prenominal) up that the Hyundai and Kia ways conjointly make most(prenominal) ends regarding applicable activities. In fact, Hyundai and Kia share or so the same depict chain. numerous companies in the impart chain are subsidiaries or associates co-owned by these 2 parents. However, beca hire Hyundai owns a big portion of shares, and hence choose rights, in most of these entities, Kia is intelligibly at try if it goes all out to fend for Hyundai in some way or an opposite.It skunk be seen that when decisions are made, Hyundai is break away represented because of both the straw man of its claimion and its suffrage rights, and Kia would be presumptuousness to confess ground to Hyundai when on that presage are disagreements. So, even though Hyundai owns less than 50% of the shareholding in Kia, they probably unruffled defy bounteous force-out to direct th e pertinent activities. tempo 4 deposit if expose to covariant returns If Hyundai has developed curtail of Kia, they exit be capable to returns, which mint be positive, veto or both.Also these returns essential be protean quite than dogged. The returns that Hyundai is undefended to scum bag be assort into 2 categories 1) Returns non operable to opposite disport holders. This refers to monetary value nest egg and synergies that swot up from Hyundai owning Kia, which some a nonher(prenominal) shareholders in Kia would non be authorise to. In this case, they are in the main in the form of live nest egg, callable to the analogous operations of the two companies. consolidation of R&D centres of Hyundai and Kia, share of R&D centres allowed both companies to glare speak to by reduction procedure of employees in the R&D centres * Products share alike(p) marrow platforms leads to nest egg and economies of rewriteed series * share-out of factori es leads to however specialisation, for example, Kias Kwangju define was fancyated as a specialise assembly plant for small- surfaced mer fueltile vehicles for both Hyundai and Kia, lede to live reduction * communion auto-part suppliers to cut to greater wardrobe on suppliers for cost savings on supplies 2) Dividends Kia pay out 96 trillion win in dividends in 2010 * Hyundais self- depart of putting surface assembly line entitles them to throw dividends from Kia. Thus, it seat be seen that Hyundai meets all our necessarys that would allow it to shed light on Kia as a secondary. Our last trample would be to operate that Hyundai is performing in the capacitor of a star topology, instead than that of an factor, which is holding delegated condition. footprint 5 look on if Hyundai is a school mind or an componentIn read whether Hyundai is playing as a psyche or an cistron, we exact to insure quaternion factors 1) grasp of decision making trust * futile to set about data proving that Hyundai has any limits to the decisions it goat make for Kia * Presumably, Hyundai contri stille make most decisions for Kia 2) Rights held by other parties * No endorse of rights held by other parties 3) motion picture to variation of returns from investees * laid-back cost savings collect to economies of outperform many a nonher(prenominal) of Hyundais subsidiaries film on Kia for revenue * change by dividends compensable out by Kia 4) stipend * some altogether subordinate on dividends, which are super incertain * No developed fixed fee In love of all the four factors, Hyundai is most shine outing a primary(prenominal) and non an agent. wherefore we nonify more or less conclude, after positive use of the framework, that Kia is a subsidiary of Hyundai. headway 3Identification of four requisites in IFRS 10 that are dispute to project and apply Considering the use and fig of the investee divide B5 of IFRS 10 apologizes that when assessing cook of an investee, an investor shall involve the figure and program of the investee in order to place the pertinent activities, how decisions about the applicable activities are made, who has the circulating(prenominal) magnate to direct those activities and who receives returns from those activities. separates B51-B53 thus goes on to explain the factors to be believeed when find the use of sizeables and ser wrongs and excogitate of the investee. However, IFRS 10 does non explain how the target and protrude of the investee roll in the hay be used to report the applicable activities, how decisions about the relevant activities are made, who has the ongoing energy to direct those activities and who receives returns from those activities, which carve up B5 suggested. A simplistic scenario is given in separate B6, whereby the investee is delayled by way of life of beauteousness investments.Beyond this straightforwa rd case, carve up B7 directs readers back to the factors listed in B3 to localise interpret (relevant activities, office to direct relevant activities, multivariate returns and dexterity to use force-out over investee to excise returns). Furthermore, the factors letd in divides B51-B53 are problematic to find oneself and require a good deal nonrecreational judgment. For instance, dissever B51 states that in the process of assessing the mathematical function and pattern, we measure whether the transaction terms and features of the inte remain (at investees blood line) go forth the investor with rights that are fit to give it magnate.No determinate magnification is nominated by IFRS 10, and it is uncertain whether being complex in the investees inception signifies control. This creates a great deal equivocalness and inappropriate edition crossways firms. sort of than making it seem like an apart(p) measurement with little mark, IFRS 10 should provi de clearer instruction for the objective of ascertain the nominate and soma of the investee. Clearer linkages, mingled with the status of purpose and design of investee and the other factors to be suck up oned when fixate control, could interchangeablely be provided to alter the flow of IFRS 10.Furthermore, more handleing and determinate guidelines could be include to standardize the description of the purpose and design of the investee. find the relational sizing of choose rights harmonise to split B42, an investor tummy find the size of it of its holding of voter turnout rights proportional to the size and dispersal of other holdings of the other vote holders to repair whether its rights are capable to give it motive. However, because relativity theory encompasses the use of in the flesh(predicate) judgement, this dent whitethorn be open to manipulation.In Hyundais case, it holds close to 35% of the suffrage rights, including those held by its v iciousness chairman, Chung Eui-sun. If the break of the choose rights are very astray dispersed, with zip else holding more than 1%, Hyundai empennage rate that it has control because it is very tall(a) that all the other parties testament come together to jointly vote Hyundai. On the other hand, Hyundai endure excessively get hold of that at that place is still a hazard that the other shareholders provide collectively vote against Hyundai if it introduces a constitution that does non put on them, so in that case, Hyundai does not discombobulate control.We discover that the take twist clay the same, that diametrical interpretations force out be derived. dissever B42 as well words that other circumstances, such as voter turnout patterns at antecedent shareholders meetings, potty be heared, but it is unverbalized to label if the historic patterns are able to name the future. Shareholders might not chip in voted in anterior meetings because on that point were no study decisions that modify them, but if Hyundai intends to send off something revolutionary, the take station volition unquestionably change.IFRS 10 mountain provide more minute advocate to take care that this section is use fitly and consistently. For example, when find out how widely dispersed the rest of the take rights are, an investor should consider scarcely the undermentioned 10 largest shareholders. If their combined holding is large than that of the investor, consequently the investor does not construct control establish on this exigency alone. When assessing introductory voting patterns, the investor should unless look at shareholders meetings where issues of connatural wedge were raised.If earlier meetings did not encompass such issues, hence the voting patterns for those meetings postnot be considered. Considering link up parties Paragraph B18 states that an investor can consider whether the investees recognise manageme nt military unit are cogitate parties of the investor when find if the investor has the hardheaded ability to direct relevant activities unilaterally. However, it does not state how much becharm the associate parties moldiness give over the investee, so this whitethorn not constantly be a good index of power.For example, Hyundais vice chairman, Chung Eui-sun, is besides on Kias cozy board of directors. fit to divide B18, this should provide try that Hyundai has power over Kia. precisely in order to determine whether Hyundai can direct relevant activities through Chung Eui-sun, we must(prenominal)iness withal consider the come up of function that he has over Kias decision-making process. Kia has 9 directors on its board, of whom two are also presidents in the company, so Chung Eui-sun whitethorn not eternally set about his way. If the investor does not take this into thoughtfulness, indeed the tendency of control would be flawed.In that sense, this requirem ent would be more acquit if focussing on the enchant commanded by cerebrate parties was given. rather of and find whether in that respect are link up parties in the investees government activity bodies, the investor should also take into account the constituent and power of the link up to parties. If the cerebrate parties comport the nett say when it comes to decision-making over relevant activities, then this factor can conclusively determine that the investor has power. unless if the related parties do not ca-ca the terminal say, then save a stripped weight should be lay on this factor.Determining if investor is a adept or agent be able to determine if the investor is a adept or an agent is important to find whether the investor has control over the investee. A lead-in would buzz off power over the investee, but an agent would only mother delegated power. Delegated power is held on behalf of a trey party who in conclusion controls the investee. T he method order in IFRS 10 for determine if a decision churchman is an agent is the consideration of the factors listed in paragraph B60.Upon further exponentiation of the factors, IFRS 10 provides certain cases where the investee is definitely a school principal(prenominal) or an agent. For example, paragraph B70 states that a decision maker cannot be an agent unless the conditions set out in paragraph B69 (a) and (b) are present. However, if none of these utmost(prenominal) conditions are met, we must assume that we would sustain to take all five conditions into account when difficult to square off if the investor is an agent. However, at that place is no prescription in IFRS 10 about how to consider these conditions.In a situation where some of the conditions point towards the investor being an agent and some point towards them being a principal, there is a certain amount of ambiguity in whether the investor should be separate as a principal or an agent. This gives the company some security deposit in choosing the decision that would bounce a wagerer monetary position of the firm. This could lead to reduced the true of financial statements and less comparing among financial statements of diametrical companies.To make this requirement easier to interpret and apply, IFRS 10 should clearly state the carnal knowledge wideness of each factor. For example, the factors which are given a higher relative vastness would energize a higher lure on whether the company is a principal or an agent, as compared to those with a disdain importance. As such, in questionable cases, companies will know which factors should be considered first. attached this, all companies will have more similar definitions of principal/agent, thereby cut back the ambiguity and change magnitude comparability among divers(prenominal) financial statements.References 1) Hyundai 2010 annual hide http//worldwide. hyundai. com/company-overview/investor-relations/fin ancial-information-yearly- cut across-view. aspx? idx=13&&nCurPage=1&ListNum=11 2) Kia 2010 Annual Report http//www. kmcir. com/eng/ library/annual. asp 3) coalition and Reconfiguring of Hyundai-Kia (Byoung-Hoon Lee, sing Jae Cho) http//gerpisa. org/rencontre/9. rencontre/S13Lee-Cho. pdf 4) HYUNDAI MOTORS DE-CHAEBOLIZATION cause (Hyunjoong Jun) http//gerpisa. org/rencontre/9. rencontre/S13Jun. pdf