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personnel may leave the organization and in such a situation Tee limited will not enjoy any economic benefit
or infact will lose the benefit of unique technical knowledge of those 11 experts.
Hence, Tee limited would not be able to use its power over Kay Limited to affect the amount of its returns
which is one of the essential criteria to assess the control, so there is no control of Tee limited on Kay
Limited.
(b) Even though Tee limited has acquired 51% stake in Kay Limited yet it does not have power over Kay
Limited as it would not be able to exercise its existing rights that give it the current ability to direct the
relevant activities, i.e. the activities that significantly affect the investee’s returns. In other words, the
relevant activity of Kay Limited is advanced research in weapons which will help Tee limited to substantiate
their position. However, the research, development and production will start only after a stringent approval
process of the defence ministry of the Central Government. Thus, regulations prevent Tee limited to direct the
relevant activity of Kay Limited which ultimately lead to prevent Tee Limited from having control.
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