During the 2022 financial year, SendIT Limited and Wheels Limited incorporated SW Traders Limited. SW Traders Limited will be a tyre dealer. SendIT Limited acquired 60% of SW Traders Limited’s share capital for R300 000, and Wheels Limited acquired 40% of the share capital for R200 000. In terms of the agreement that governs the operations of SW Traders Limited, all decisions relating to the operations of SW Trad-ers Limited need to be taken by both SendIT Limited and Wheels Limited. Neither party can make decisions without each other’s consent. SW Traders Limited does not have any administrative staff and is 100% administered by a combination of SendIT Limited and Wheels Limited staff, which includes the company’s finance function. More than half of SW Traders Limited’s sales are channelled to SendIT Limited and Wheels Limited. SW Traders Limited will always give preference to the needs of SendIT Lim-ited and Wheels Limited over that of any third party who wishes to buy tyres from SW Traders Limited Required: With reference to the Investment in SW Traders Limited, discuss the nature of SendIT Limited’s investment in SW Traders Limited in accordance with the requirements of IFRS 11.
Investment in SW Traders Limited
During the 2022 financial year, SendIT Limited and Wheels Limited incorporated SW Traders Limited. SW Traders Limited will be a tyre dealer. SendIT Limited acquired 60% of SW Traders Limited’s share capital for R300 000, and Wheels Limited acquired 40% of the share capital for R200 000. In terms of the agreement that governs the operations of SW Traders Limited, all decisions relating to the operations of SW Trad-ers Limited need to be taken by both SendIT Limited and Wheels Limited. Neither party can make decisions without each other’s consent. SW Traders Limited does not have any administrative staff and is 100% administered by a combination of SendIT Limited and Wheels Limited staff, which includes the company’s finance function. More than half of SW Traders Limited’s sales are channelled to SendIT Limited and Wheels Limited. SW Traders Limited will always give preference to the needs of SendIT Lim-ited and Wheels Limited over that of any third party who wishes to buy tyres from SW Traders Limited
Required:
With reference to the Investment in SW Traders Limited, discuss the nature of SendIT Limited’s investment in SW Traders Limited in accordance with the requirements of IFRS 11.
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