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RS Ltd. is formed by R (highway construction) and S (highway operation). R decides construction-related matters unilaterally; S decides operating matters unilaterally for 30 years; only FUNDING AND CAPITAL STRUCTURE decisions require unanimous consent of both. Is RS Ltd. a joint arrangement?
AYes — funding and capital structure is the most significant activity since neither construction nor operation can occur without it, and that decision is joint
BYes only if R and S co-own the highway equally
CNo, because both R and S take decisions independently for their phases
DNo — Ind AS 111 requires unanimous consent on EVERY relevant decision
Answer & Solution
Correct answer: A. Yes — funding and capital structure is the most significant activity since neither construction nor operation can occur without it, and that decision is joint
Where multiple relevant activities exist, the parties must identify which most significantly affects returns. Funding & capital structure underpin both construction and operation, so the unanimous-consent requirement on that decision delivers joint control. Ind AS 111 illustration 10.
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