Crypto operates in the power industry, and owns 45% of the voting shares in Kurran. Kurran has four other investors which own the remaining 55% of its voting shares and are all technology companies.

The largest of these holdings is 18%. Kurran is a property developer and purchases property for its renovation potential and subsequent disposal. Crypto has no expertise in this area and is not involved in the renovation or disposal of the property.

The board of directors of Kurran makes all of the major decisions but Crypto can nominate up to four of the eight board members. Each of the remaining four board members are nominated by each of the other investors.

Any major decisions require all board members to vote and for there to be a clear majority. Thus, Crypto has effectively the power of veto on any major decision.

There is no shareholder agreement as to how Kurran should be operated or who will make the operating decisions for Kurran.

The directors of Crypto believe that Crypto has joint control over Kurran because it is the major shareholder and holds the power of veto over major decisions.

Crypto has also entered into a contract to purchase 80% of the shares of an overseas subsidiary.

The directors are concerned about the procedures required to translate the results of a foreign subsidiary into Crypto’s presentational currency to prepare the consolidated financial statements.

Specifically, the directors are concerned about the translation process and the treatment of cumulative foreign exchange gains and losses, particularly as regards the non-controlling interest (NCI).

Required:

(i) As far as the definition of control is concerned, discuss the key differences between FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and IFRS® 10 Consolidated Financial Statements. Your answer should also briefly explain the classification of joint arrangements in IFRS 11 Joint Arrangements. (6 marks)

(ii) Discuss the advice which should be given to Crypto regarding how Kurran should be accounted for under FRS 102. (6 marks)

(iii) Advise Crypto on the FRS 102 procedures to be followed when translating the results of a foreign subsidiary into the presentation currency of the group. Your answer should also set out any differences between FRS 102 and IAS® 21 The Effects of Changes in Foreign Exchange Rates as regards the treatment of cumulative foreign exchange gains and losses including those relating to the NCI. (5 marks)