Practice Activity 21.2 Presence of a joint arrangement

Assume that People Furniture Limited and Good Steel Limited enter into a contract to produce the furniture and related accessories. Furniture With Steel, a newly incorporated entity, has been structured to execute the purpose of the investors. People Furniture Limited has voting rights of 60 percent and Good Steel Limited has voting rights of 40 percent over the new company’s relevant activities. Based on the contractual arrangements, at least 65 percent of the voting rights are required to make decisions about the new company’s relevant activities.

Required: Ascertain the presence or absence of a joint arrangement? Give reasons for your answer.

Suggested answer to practice activity 21.2