ACY3001-Chapter 15 PPT_20190826.pptx - Equity CHAPTER 15 LEARNING OBJECTIVES After studying this chapter you should be able to 15-1 1 Describe the

ACY3001-Chapter 15 PPT_20190826.pptx - Equity CHAPTER 15...

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15-1 1. Describe the corporate form and the issuance of shares. 2. Explain the accounting and reporting for treasury shares. LEARNING OBJECTIVES 3. Explain the accounting and reporting issues related to dividends. 4. Indicate how to present and analyze equity. After studying this chapter, you should be able to: Equity CHAPTER 15
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15-2 PREVIEW OF CHAPTER 15 Intermediate Accounting IFRS 3rd Edition Kieso ● Weygandt ● Warfield
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15-3 Three primary forms of business organization. Proprietorship Partnership Corporation Special characteristics of the corporate form: 1. Influence of corporate law. 2. Use of the share system. 3. Development of a variety of ownership interests. LO 1 Corporate Capital LEARNING OBJECTIVE 1 Describe the corporate form and the issuance of shares.
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15-4 Corporate Law Corporation must submit articles of incorporation to the appropriate governmental agency for the country in which incorporation is desired. Governmental agency issues a corporation charter. Advantage to incorporate where laws favor the corporate form of business organization. Corporate Form LO 1
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15-5 Share System In the absence of restrictive provisions, each share carries the following rights: 1. To share proportionately in profits and losses. 2. To share proportionately in management (the right to vote for directors). 3. To share proportionately in assets upon liquidation. 4. To share proportionately in any new issues of shares of the same class—called the preemptive right . LO 1 Corporate Form
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15-6 Variety of Ownership Interests Ordinary shares represent the residual corporate interest. Bears ultimate risks of loss. Receives the benefits of success. Not guaranteed dividends nor assets upon dissolution. Preference shares are created by contract, when shareholders’ sacrifice certain rights in return for other rights or privileges, usually dividend preference . LO 1 Corporate Form
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15-7 Equity is often subclassified on the statement of financial position into the following categories 1. Share capital. 2. Share premium. 3. Retained earnings. 4. Accumulated other comprehensive income. 5. Treasury shares. 6. Non-controlling interest (minority interest). Components of Equity LO 1
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15-8 Other comprehensive income comprises items of income and expense that are not recognised in profit or loss as required or permitted by other HKFRSs. The components of other comprehensive income include: a. changes in revaluation surplus (see HKAS 16 Property, Plant and Equipment and HKAS 38 Intangible Assets); b. remeasurements of defined benefit plans (see HKAS 19 Employee Benefits); c. gains and losses arising from translating the financial statements of a foreign operation (see HKAS 21 The Effects of Changes in Foreign Exchange Rates); d. gains and losses on remeasuring available-for-sale financial assets (see HKAS 9 Financial Instruments: Recognition and Measurement); e. the effective portion of gains and losses on hedging instruments in a cash flow hedge (see HKAS 9).
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