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Question 3c

(c) Fill also jointly controls coal mines with other entities. The Theta mine is owned by four participants. Fill owns 28%, and the other three participants each own 24% of the mine. The operating agreement requires any major decisions to be approved by parties representing 72% of the interest in the mine. Fill is considering purchasing one of the participant’s interests of 24%.

The directors of Fill wish advice on whether the proposed revision to the Conceptual Framework will affect the decision as to whether Fill controls the mine.

The directors are also wondering whether the acquisition of the interest would be considered a business combination under IFRS Standards. (10 marks)

Required:
Advise the directors of Fill on how the above transactions should be dealt with in its financial statements with reference to relevant IFRS Standards and the Conceptual Framework and its proposed revision where indicated.

Note: The split of the mark allocation is shown against each of the three issues above.