CONVEX Ltd. is a new company that was established on 1st January, 2020 to oversee the production of coronavirus vaccines for Ghana. On 1st July, 2020, CONVEX Ltd. acquired 75% shares in CONCAVE Ltd., a pharmaceutical company, to speed up the vaccine production. As a new graduate from UGBS, CONVEX Ltd. has employed you as their accountant. At a management meeting held, a number of issues were raised about how CONVEX Ltd. should deal with its transactions and investment in CONCAVE Ltd. and the need to conduct financial ratio analysis to determine the profitability and sustainability of CONCAVE Ltd. Provide your views on how the following issue should be addressed. Issue At the meeting, executive members could not agree on whether CONVEX Ltd. should prepare and present both separate and consolidated financial statements. Some of the executive members raised issues that CONVEX Ltd. does not need to prepare consolidated financial statements because it is simply an investment made in CONCAVE Ltd. Again, others were of the view that CONVEX Ltd. is neither a public company nor is it in the process of filing financial statements for the purpose of issuing shares or debt to the public.
CONVEX Ltd. is a new company that was established on 1st January, 2020 to oversee the
production of coronavirus vaccines for Ghana. On 1st July, 2020, CONVEX Ltd. acquired 75%
shares in CONCAVE Ltd., a pharmaceutical company, to speed up the vaccine production. As a
new graduate from UGBS, CONVEX Ltd. has employed you as their accountant. At a management
meeting held, a number of issues were raised about how CONVEX Ltd. should deal with its
transactions and investment in CONCAVE Ltd. and the need to conduct financial ratio analysis to
determine the profitability and sustainability of CONCAVE Ltd.
Provide your views on how the following issue should be addressed.
Issue
At the meeting, executive members could not agree on whether CONVEX Ltd. should prepare and
present both separate and consolidated financial statements. Some of the executive members raised
issues that CONVEX Ltd. does not need to prepare consolidated financial statements because it is
simply an investment made in CONCAVE Ltd. Again, others were of the view that CONVEX Ltd.
is neither a public company nor is it in the process of filing financial statements for the purpose of
issuing shares or debt to the public.
Step by step
Solved in 2 steps