Problem
80% of Jack Ltd is owned by katty Ltd. During the past year, Jack Ltd ran into financial difficulties and defaulted on repayment of its bank loan. Consequently, the bank has used the powers in the loan agreement to monitor Jack Ltd's activities closely to obtain repayment of its debt. The company must now obtain the bank's authorisation for any expenditure over $5 000 and no changes in operations of the company are permitted without the bank's approval.
Task
Providing a full justification to support your reasoning, indication if consolidation must occur for the year ending 30 June 2023
When preparing consolidated financial statements, why consolidation adjustments are not made in the ledger accounts of the subsidiaries or the parent entity?