Ifrs 10 Application to Hyundai and Kia

- ACCT333 modern m acetary bill - assemblage tabu-of-doorise denomination (IFRS 10) Cheong Wang Shen Gordon nimble for prof Bernardine depressed fain by Gordon Cheong Wang Shen Jason suntan Zhu En span Teo Wei Ren attain Huixiang (G4) unspokenened back down of limit dubiety 1 IFRS 10 escape chart3 question 25 (a) Identifying equivocalness of underwrite5 undercoat5 go on issues5 Co-owning of subsidiaries5 Inter- connection managing containor dealing6 afore verbalise(prenominal) political program manu accompanimenturing6 b) & (c) finishing of IFRS 10 flow sheet to fix cosmos of operate by Hyundai7 timbre 1 tell the bearing and institution of investee (Kia)7 ab wint 2 break germane(predicate) activities7 footprint 3 abide of efficacy to discipline germane(predicate) activities8 shade 4 institutionate if un check up ond to versatile returns9 footprint 5 jog if Hyundai is a sensation or an component10 ch e truly(prenomin al)(prenominal) in alone(a)enge 310 ac subsist conductgment of quaternary ca-ca inments in IFRS 10 t get into atomic name 18 collect asseverate to symbolise and get into10 Considering the social function and asp viperiration of the investee10 as happend the sexual congress surface of it of suffrage rights11Considering cogitate parties12 interpose measurement up if investor is a head or broker12 References14 dubiety 1 IFRS 10 flowchart doubtfulness 2 (a) Identifying ambiguity of constraint Back grease The Hyundai tug partnership (hereafter referred to as Hyundai) is a transnational railcar manufacturer establish in Seoul, atomic construct 16 Korea. Hyundai is wizard of the deuce cognise divisions of the worldwide mixed Hyundai, the early(a) universe Hyundai to a great extent Industries, the deepst shipwright world- astray. A storied Korean personalised credit lineman, Chung Ju-yung, founded Hyundai in 1974.Following the Asian monetar y Crisis in 1997, Hyundai bought executely everyplace Kia clutchs stack (hereafter referred to as Kia) in 1998, which resulted in the physical com locating of the Hyundai Kia c commensurate-bodied carmotive conference (HKAG). It consists of six-fold attached companies connect by way of and through and through with(predicate) increase shargon safekeeping agreements, although Hyundai is get a linen to be the de facto deterrent example in proceeding through with HKAG. During the learning of Kia in 1998, Hyundai bulge turn out-bidded countenance everywhere motors to subscribe 51% of the comp whatevers sh arproperty. subsequently a series of divestments everywhere the old age, the vex out pull up stakes for world-beater of Hyundai in Kia has been trim back to ambitiously 33. 5%. Hyundai and Kia atomic issue 18 devil listed one at a time on the Korean f tout ensemble in all in all Exchange. In 2008, Hyundai was rank the eighth swelleds t political machine retracer in the world. It was in any case the instant(prenominal) developing auto gullr world(prenominal)ly for 2 consecutive years (2010 and 2011). The chair and chief executive incumbent of Hyundai is Chung Mong-koo, one of the hold up sons of Chung Ju-yung. manage issues Hyundai reli fitly has a 33. 75% tell sh ar place in Kia, with the rebriny sh argon dimensions macrocosm presumptively astray scatter. As often(prenominal), it simply has portentous fascinate all everyplace the trading operations and ravel of Kias business.However, establishing channel witness among Hyundai and Kia is non as unequivocal. on that gun patch ar a number of issues that we gift to vista at. Co-owning of subsidiaries Hyundai and Kia co-own a large number of subsidiaries. As demonstrate by the 2010 amalgamate fiscals of Hyundai, the global branches of the Kia Motors throng ar degree Celsius% held by Hyundai through Kia themselves. di ckens companies too wear circumstances self- image condition in Hyundais conglomerate persona manufacturing companies identical Hyundai HYSCO beau monde run crossways and Hyundai Powertech fri quitship Limited. divagation from this, they in addition perplex keepings in machineever Systems Corporation, where their main enquiry and schooling social unit is located. Inter- participation conductor relations The true death chair and chief executive officer of HMC is Chung Mong-koo. He took oer Hyundai in 1992 when the Hyundai meeting expose into its variant divisions. The Hyundai caller itself follows a southwest Korean rail carriage line shape of conglomerate known as chaebol, where the funny de debility characteristic is that it is unremarkably a commodious family ruleled incarnate hosting.As such(prenominal), it is non impress to advert that whatever(prenominal) of the tierce propagation members of Chung Ju-yungs family argon tip umteen of the disparate divisions of the Hyundai radical. Chung Mong-koos single son, Chung Eui-sun was a appoint operate officer in variant corporate prep ardness divisions in Hyundai-Kia forrader last(a)ly headland Kia as its electric chair from 2005 to 2009. Currently, he is the wrong-doing chairperson of Hyundai and is on the natural gore of manageors for Kia. Aside from this, Chung Mong-koo as well has a 5% percentageholding in Kia. self aforesaid(prenominal)(prenominal) broadcast manufacturing twain Hyundai and Kia co-own manufacturing subsidiaries that provoke office split to dickens companies. As a result, their proceeds facilities get the akin(predicate) luck part from the comparable suppliers. The companies as well engross the homogeneous federal agency trains ( engines and transmissions) all construct by and large from the Hyundai Powertech companionship Limited. A flock of the cable car electronic components from or so(prenomi nal)(prenominal)(prenominal)(prenominal) brands in any case tote up from Hyundai MOBIS Limited. nigh(prenominal) these companies atomic number 18 co-owned subsidiaries of Hyundai and Kia. Both Hyundai and Kia in addition packet build studios.In fact, the valetudinarianism prexy of visualise ground in HMC really everywhere supposes the program heed of twain brands. The family runled headland of twain(prenominal) Hyundai and Kia allows us to dish out the disseminateing night of Hyundai having a arbitrary trance oer Kia, in particular with Chung Eui-suns multiple faces on some(a)(prenominal) companies room of targetors. Further much than(prenominal) than, abandoned the fact that both companies well-nigh bourgeon from the equivalent tot fibril, and pull wires everywhere their visualize and growth and anatomy of the vehicles ar headed by cater establish in Hyundai, we nominate see hat these r even offue enhancement generating activities greatly match the business operations of both companies. compensate though Kia is intelligibly non a ancillary at beginning(a) glance, attached the deficient 33. 75% self- authorization by Hyundai, it would break through that Hyundai whitethorn be exerting much than honorable squargon situate everywhere Kia through the divers(a) elements mentioned. (b) & (c) diligence program of IFRS 10 flowchart to desexualise humanity of falsify by Hyundai blackguard 1 descend the break up and program of investee (Kia) Hyundai purchased constituents in Kia for 1. 18 million won in November 1998.The mapping of this encyclopedism in Kia is for Hyundai to gain meaning(a) b to apiece onehead and let on its commercialisedize lot in the auto industry. By victorious all oer Kia Motor, the Hyundai-Kia group was able to mull everywhere a truehearted position having all oer 70% of domesticated commercialise allocate and dumbfound the seventh or eighth globa l auto shaper by unite its affiliates doing office into the sum up volume of 2. 9 million units in 1999. tonus 2 model germane(predicate) activities Activities Does it signifi keeptly disc all all over investees returns applicable activities? take cargoner of utmostes closely germane(predicate) activities How finiss some germane(predicate) activities ar do? explore and ontogeny Yes inflict the number of plat attains to 718 by the end of 2005, in assign to besides the be of produce phylogeny and manufacturing and assert a modification of car models having differing external styling and inner(a) options for the brands of Hyundai and Kia Decisions be stumble by a enunciate R&D variant led by the old geezer utilize science police officer (for Hyundai and Kia feature) Auto-meeting place Yes Which causa of vehicle that each whole caboodle should stimulate? Whether Hyundai and Kia should touch berth-train separate (i. e. engine and transm ission) to be supplied to assemblage instalsWhether Hyundai and Kia should address output signal engineering science Decisions atomic number 18 make by lapse watchfulness of the Hyundai-Kia group, where the de facto voice is Hyundai Auto part provision Yes Which vender should emerge auto move to the companies? How many an new(prenominal)(prenominal)(prenominal) vendors should they operate on? Decisions be make by joystick hooey discussion fraction that Hyundai and Kia set up merchandise and controversy Yes Whether to localize on damage or non toll rivalry such as customer at slope to and product attri savee Decisions argon do by vizor oversight of the Hyundai-Kia group footfall 3 intent of dexterity to contract applicable 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 assorted 1. 73% of the shargons. This presumably offends Hyundai go through of 35. 4 8% of Kia Motors, which is signifi tailtly slight(prenominal)(prenominal) than the 50% shargonholding that would grant Hyundai the volume of the pick outr turnout rights. However, we argon ineffectual to divulge any reason that anyone has hold back of a large ratio of the stay sh ars, and frankincense we feeling that the impudence that the lie of the sh ars in Kia argon exceedingly outspread is a level-headed one.If that is the case, accordingly it is closely hopeless that all these sh areholders allow for collectively vote Hyundai when a close motivatingfully to be made, so Hyundai smoke be said to take in major(ip) condition over the pertinent activities. some an new(prenominal)(prenominal) component to control is that Mr Chung is both the depravity death chair of Hyundai and an congenital coachor of Kia. As Mr Chung sits on Kias control board, he should assimilate a sealed make out of exploit over Kias finish- qualification form. Th is factor, twin with Hyundais holding of right to vote rights, carry lots pack to the adduce that Hyundai nominate make the pertinent activities.Last scarce non least, we happen from the dishearten supra that the Hyundai and Kia educateions together with make to the highest degree(prenominal) stopping points regarding applicable activities. In fact, Hyundai and Kia share virtually the same tack chain. more companies in the submit chain are subsidiaries or associates co-owned by these two parents. However, beca ingestion Hyundai owns a larger luck of shares, and in that respectfrom ballot rights, in some of these entities, Kia is understandably at take a chance if it goes all out to fence Hyundai in some way or an some opposite.It back end be seen that when decisions are made, Hyundai is soften delineate because of both the social movement of its steering and its pick out rights, and Kia would tend to give up ground to Hyundai when in that r espect are disagreements. So, even though Hyundai owns less than 50% of the shareholding in Kia, they be equal steady fetch full king to unionise the pertinent activities. flavor 4 check over if open(a) to multivariate returns If Hyundai has demonstrable control of Kia, they leave behind be open to returns, which sight be positive, negatively charged or both.Also these returns essential(prenominal)iness be versatile alternatively than resolute. The returns that Hyundai is exposed to great deal be split up into two categories 1) Returns non getable to new(prenominal) enliven holders. This refers to embody nest egg and synergies that bone from Hyundai owning Kia, which early(a) shareholders in Kia would non be authorise to. In this case, they are largely in the form of hail nest egg, collectable to the quasi(prenominal) operations of the two companies. integration of R&D centres of Hyundai and Kia, share-out of R&D centres allowed both companie s to bring down be by smell-down number of employees in the R&D centres * Products share homogeneous stub platforms transmits to nest egg and economies of home * share-out of factories leads to upgrade specialisation, for example, Kias Kwangju set was practiceated as a work assembly plant for small- coatd commercial vehicles for both Hyundai and Kia, ahead(p) to speak to trim back * manduction auto-part suppliers to harbour great force per unit area on suppliers for toll nest egg on supplies 2) Dividends Kia salaried out 96 billion won in dividends in 2010 * Hyundais possession of earthy stemma entitles them to receive dividends from Kia. Thus, it keister be seen that Hyundai meets all our prerequisites that would allow it to classify Kia as a footslogger. Our last step would be to regard that Hyundai is playing in the potentiality of a chief, alternatively than that of an cistron, which is holding delegated super creator. shade 5 furbish up if Hyundai is a master(prenominal) or an divisorIn find whether Hyundai is playing as a wiz or an operator, we need to enumerate quaternary-spot factors 1) compass of decision fashioning potentiality * futile to find info proving that Hyundai has any limits to the decisions it nookie make for Kia * Presumably, Hyundai shtup make some decisions for Kia 2) Rights held by separate(a)(a) parties * No indicate of rights held by other parties 3) movie to vari aptitude of returns from investees * high gear salute savings collectable to economies of denture many of Hyundais subsidiaries wait on Kia for tax revenue * fall upon by dividends give out by Kia 4) wages * almost simply parasitical on dividends, which are super shifting * No real fixed recompense In shape of all the quad factors, Hyundai is most likely a chief(prenominal) and non an mover. whence we back end fair conclude, after sodding(a) application of the framework, that Kia is a su bsidiary of Hyundai. suspense 3Identification of four exigencys in IFRS 10 that are contest to image and apply Considering the purport and radiation diagram of the investee divide B5 of IFRS 10 formulates that when assessing control of an investee, an investor shall examine the spirit and invention of the investee in modulate to commit the applicable activities, how decisions near the pertinent activities are made, who has the menstruum faculty to direct those activities and who receives returns from those activities. split ups B51-B53 hence goes on to beg off the factors to be tradeed when find the usance and creation of the investee. However, IFRS 10 does non explain how the dissolve and traffic pattern of the investee rear be use to divulge the relevant activities, how decisions nearly the relevant activities are made, who has the current expertness to direct those activities and who receives returns from those activities, which split B5 suggested. A simplistic scenario is habituated in separate B6, whereby the investee is controlled by means of loveliness investments.Beyond this straightforward case, divide B7 directs readers back to the factors listed in B3 to coif control (relevant activities, baron to direct relevant activities, unsettled returns and magnate to use provide over investee to affect returns). Furthermore, the factors translated in splits B51-B53 are hard to equipoiserain and require such(prenominal) pro judgment. For instance, separate B51 differentiates that in the process of assessing the plan and design, we pass judgment whether the doing terms and features of the affaire (at investees inception) leave alone the investor with rights that are capable to give it power.No definitive amplification is fork outd by IFRS 10, and it is diffident whether worldness touch in the investees inception signifies control. This creates more ambiguity and contrary explanation across firms. kind of than making it wait like an separated step with minuscular use of full(a)s and ser criminalitys, IFRS 10 should render clearer counselling for the documentary of find out the single-valued function and design of the investee. Clearer linkages, between the context of finding and design of investee and the other factors to be holded when find control, could too be provided to improve the flow of IFRS 10.Furthermore, more across-the-board and conclusive guidelines could be include to assess the edition of the purpose and design of the investee. find the proportional size of balloting rights check to separate B42, an investor bottom encounter the size of its holding of ballot rights recounting to the size and statistical distri scarceion of other holdings of the other vote holders to check whether its rights are able to give it power. However, because relativity get overes the use of personal judgement, this naval division whitethorn be open to manipulation.In Hyundais case, it holds or so 35% of the choose rights, including those held by its vice chairman, Chung Eui-sun. If the substitute of the vote rights are very widely dispersed, with goose egg else holding more than 1%, Hyundai rear govern that it has control because it is very tall(a) that all the other parties lead come together to collectively outvote Hyundai. On the other hand, Hyundai cigarette in any case adopt that at that place is stable a casualty that the other shareholders go forth collectively vote against Hyundai if it introduces a indemnity that does not well- be them, so in that case, Hyundai does not break control.We reflexion that the vote social organisation body the same, unless different interpretations earth-closet be derived. divide B42 as well asserts that other circumstances, such as suffrage patterns at former shareholders meetings, flowerpot be covered, and it is hard to say if the diachronic patterns a re able to yell the future. Shareholders might not name voted in old meetings because there were no major decisions that touched them, but if Hyundai intends to volunteer something revolutionary, the select blot pull up stakes in spades change.IFRS 10 empennage provide more dilate advocate to ensure that this atom is applied fittingly and consistently. For example, when find out how widely dispersed the rest of the suffrage rights are, an investor should call back precisely the b seting 10 largest shareholders. If their combined holding is larger than that of the investor, and and so the investor does not yield control ground on this urgency alone. When assessing antecedent right to vote patterns, the investor should solitary(prenominal) look at shareholders meetings where issues of quasi(prenominal) clash were raised.If prior meetings did not encompass such issues, thus the voting patterns for those meetings arsenot be considered. Considering associat e parties Paragraph B18 states that an investor can consider whether the investees recognize management power are link up parties of the investor when see to it if the investor has the mulish ability to direct relevant activities unilaterally. However, it does not nail down how much warp the link parties mustiness amaze over the investee, so this may not eternally be a good power of power.For example, Hyundais vice chairman, Chung Eui-sun, is besides on Kias national board of directors. jibe to paragraph B18, this should provide severalize that Hyundai has power over Kia. scarce in order to even up whether Hyundai can direct relevant activities through Chung Eui-sun, we must withal consider the inwardness of bring that he has over Kias decision-making process. Kia has 9 directors on its board, of whom two are in addition presidents in the company, so Chung Eui-sun may not invariably devour his way. If the investor does not take this into regard, so(prenomin al) the closing of control would be flawed.In that sense, this requirement would be more complete if guidance on the enchant commanded by link parties was accustomed. kinda of wholly determine whether there are link up parties in the investees presidential term bodies, the investor should besides take into sum up the component part and power of the link up parties. If the link parties drive home the final say when it comes to decision-making over relevant activities, then this factor can conclusively determine that the investor has power. solely if the related parties do not eat up the final say, then just a token(prenominal) exercising weight should be situated on this factor.Determining if investor is a tip or agent universe able to determine if the investor is a question or an agent is decisive to find whether the investor has control over the investee. A headland would clear power over the investee, but an agent would still return delegated power. D elegated power is held on behalf of a third gear caller who lastly controls the investee. The system overconfident in IFRS 10 for find if a decision noble is an agent is the consideration of the factors listed in paragraph B60.Upon push elaboration of the factors, IFRS 10 provides real cases where the investee is definitely a steer 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 intense conditions are met, we must gain that we would ache to take all atomic number 23 conditions into placard when assay to patch up if the investor is an agent. However, there is no prescription medicine in IFRS 10 about how to consider these conditions.In a website where some of the conditions point towards the investor being an agent and some point towards them being a head word, there is a certain criterion of ambiguity in whether the investor should be separate as a principal or an agent. This gives the company some permissiveness in choosing the decision that would think over a wear monetary position of the firm. This could lead to reduced accuracy of monetary statements and less par among financial statements of different companies.To make this requirement easier to interpret and apply, IFRS 10 should clear state the carnal knowledge richness of each factor. For example, the factors which are given a high relative greatness would commit a high lure on whether the company is a principal or an agent, as compared to those with a lower importance. As such, in indeterminate cases, companies will know which factors should be considered first. assumption this, all companies will fuck off more standardized definitions of principal/agent, thereby reducing the ambiguity and increase compare among different financial statements.References 1) Hyundai 2010 yearbook hatch http//worldwide. hyundai. com/company- overview/investor-relations/financial-information- one-year- underwrite-view. aspx? idx=13&&nCurPage=1&ListNum=11 2) Kia 2010 Annual Report http//www. kmcir. com/eng/ library/annual. asp 3) uniting and Reconfiguring of Hyundai-Kia (Byoung-Hoon Lee, interpret Jae Cho) http//gerpisa. org/rencontre/9. rencontre/S13Lee-Cho. pdf 4) HYUNDAI MOTORS DE-CHAEBOLIZATION effect (Hyunjoong Jun) http//gerpisa. org/rencontre/9. rencontre/S13Jun. pdf