work is worship (Service) (2728 Points)
01 November 2012Hi
Doubt 1
If authorised capital of Subsidiary is 30,000 Shares of 100 each
Issued and Subscribed Share Capital is 24000 shares of 100 each
A holding company initially purchases 9000 shares at 15,00,000
Later subsidiary issues 3 bonus shares for every 5 shares held
Qn : Percentage of share holding by Holding company in subsidiary is calculated based on authorised or issued capital.
Qn: What would be total Issued and Subscribed shares of Subsidiary after bonus issue
ABHINANDAN JAIN
(CA Student)
(886 Points)
Replied 01 November 2012
Holding ratio is to be calculated on Issued cap (not Authorsed Capital)
Holding ratio will be (After effect of Bonus):
9000+5400 / 24000+14400 = 37.5% (since holding is less than 50 %, control doesn't exists)
Total Issued cap of Subsy after Bonus is 38400(i.e. 24000+14400) shares of Rs 100 each
work is worship
(Service)
(2728 Points)
Replied 01 November 2012
HI Abhinandan
Ru sure on the % of holding as in one prob , it is shown as
9000+5400 = 14400
14400/24000 = 60%
Also i feel you r contradicting your statement when you say it should be on issued capital
so bonus is not issued capital
Pls reply
ABHINANDAN JAIN
(CA Student)
(886 Points)
Replied 01 November 2012
i think u hv a misconception that Bonus is not a Issued capital..Bonus is always a part of Issued Capital Bonus shares are issued utilising reserves by passing entry; R & S A/c...Dr To Eq Share Capital..
Holding Ratio calculated by me is absolutely correct
But as far as ur Problm is concerned..u see that quest it may so happen that Entry for Bonus already been passed...in that case ur solution is correct....
I hv given my ans assuming entry of Bonus has not yet passed..i.e. 24000 shares is without giving effect of Bonus shares ..i.e excluding bonus shares issued
Your solution is also correct if ques says that Issued cap showing in balance sheet is after adjustment of Bonus Issue.
But In consolidation problems..In 90% of ques..issued cap given in B/sht is without giving effect of Bonus issue...tabhi to achcha problem banta hai..
If problem is silent regarding whether entry has been passed or not..ASSUME entry has not been passed.
Shobhit
(Associate)
(75 Points)
Replied 02 November 2012
| Originally posted by : ABHINANDAN JAIN | ||
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Holding ratio is to be calculated on Issued cap (not Authorsed Capital) Holding ratio will be (After effect of Bonus): 9000+5400 / 24000+14400 = 37.5% (since holding is less than 50 %, control doesn't exists) Total Issued cap of Subsy after Bonus is 38400(i.e. 24000+14400) shares of Rs 100 each HQn : Percentage of share holding by Holding company in subsidiary is calculated based on authorised or issued capital. Read more at: /forum/detail Qn : Percentage of share holding by Holding company in subsidiary is calculated based on authorised or issued capital. Read more at: /forum/details.asp?mod_id=226087#.UJH3Z2e_RFA |
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Agree with the above calculation. But would just like to add that in determining control, involvement of directors (of investing co.) in the Board (of investee co.) is also considered.
So if the shareholding is less than 50% but the directors are actively involved in the decision making process which can result into control, even then that company will be called a subsidirary irrespective of the % holding.
But in the given case, in the absence of any such info we go by the shareholding %.
ABHINANDAN JAIN
(CA Student)
(886 Points)
Replied 02 November 2012
@ Shobhit
I do not know whether u r right or wrong..i want ask that how directors(of holding) can participate in affairs of the subsy company if shareholding is less than 50%.
pls support ur ans with any real life example of any company in which above situation persists...?
Shobhit
(Associate)
(75 Points)
Replied 02 November 2012
Following is the definition of control as per AS-21:
Kazi Md. Sazzad Ali
(Senior Articled Student)
(30 Points)
Replied 11 November 2012
CA. JAIN
(Chartered Accountant)
(466 Points)
Replied 13 November 2012
Hello,
% of share holding is cal on issued capital.
Note; Bonus share issued is also a part of issued capital.
Now your question's sol:
U said issued capital is 24000 @ 100
Note; it doesnt mention that its before bonus or after bonus....???
But when we read that a co. which initially invsted on 9000 shres, got bonus @ 3:5 ratio...So in my view, from the word initially, we can interpret that issued capital is given after considering bonus shares, so thats why sol assumed that issued capital is after bonus.
and one more point look at authorised capital, so it;s mean that co. capital cannot be more than 30000.
AND: It's totally depend upon assumption...But as far as logic is concern, abhinandan and me both are same.
Shobhit
(Associate)
(75 Points)
Replied 19 November 2012
| Originally posted by : Kazi Md. Sazzad Ali | ||
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Dear I think Abhinandan Jain is correct replied 10 days ago. |
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I never said he was wrong. I just made an additional point.
Thanks!
CAclubindia
