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Company A acquired 80% of Company B for cash. Shareholder agreement signed 1 June 20X1 with an 'appointed date' of 1 April 20X1; board representation passes on 1 July 20X1; consideration paid 15 July 20X1; shares transferred 1 August 20X1. The acquisition date is:
A1 August 20X1 (date shares transferred)
B1 June 20X1 (agreement)
C1 April 20X1 (appointed date)
D1 July 20X1 (date board representation passes giving power over the relevant activities)
Answer & Solution
Correct answer: D. 1 July 20X1 (date board representation passes giving power over the relevant activities)
Control = power over relevant activities + exposure to variable returns + ability to use power to affect returns. Board representation (1 July) is when A gains power over Company B's financial and operating policies. The appointed date is irrelevant for control; payment and share transfer follow control.
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