Chapter 2 KB - Chapter 2 Investments in Equity Securities...

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Chapter 2 1 Chapter 2 Investments in Equity Securities (Overview of the course)
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Chapter 2 2 Outline Broad overview of accounting options when one company buys shares of another company Review of 5 different types of investments Held-for-trading Available-for-sale Significant influence Control Joint venture
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Chapter 2 3 Learning Objectives 2 main accounting methodologies: Cost method Equity method Overview of purchase discrepancy and amortization of purchase discrepancy Overview of the concepts involved with differential reporting
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Chapter 2 4 The main question of the course How can a Canadian company report in its financial statements an investment in shares of another company?
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Chapter 2 5 5 types of share investments Held for trading Available for sale Significant influence Control Joint venture
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Chapter 2 6 Definitions Subsidiaries (Sec. 1590) If P controls S then P is the parent and S is the subsidiary Control: exists if P has the continuing power to determine the strategic operating, investing, and financing policies of S without the cooperation of others (sec. 1590.03)
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Chapter 2 7 Definitions (subsidiary) Control is assumed if P owns more than 50% of the shares but there are also other considerations “Business combination” (sec 1581) is the technical term where one company aquires another company either through: Buying its assets directly Buying voting shares Accounting method = Consolidation
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Chapter 2 8 Definitions- Investments (sec 3051) Significant Influence: An investment in another company which does not convey control and is not an investment in a joint venture but allows the investor to exercise significant influence over the strategic operating, investing, and financing policies of the investee Accounting method = Equity method
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Chapter 2 9 Definitions – Joint Ventures (sec 3055) Each venturer shares the power to determine the strategic operating, financing, and investing policies and no single venturer is able to unilaterally control the venture Accounting method: proportionate consolidation
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Chapter 2 10 Other handbook sections Pages 37 – 40 list various other handbook sections and definitions for which we will look at the details later in the course
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Chapter 2 11 Other Related Handbook Sections Section 1300: “Differential Reporting” Section 1530: “Comprehensive Income” Section 1581: “Business Combinations” Section 1600: “Consolidated Financial Statements” Section 1625: “Comprehensive Revaluation of Assets and Liabilities” Section 1650: “Foreign Currency Translation” Section 1701: “Segment Disclosures” Section 3062: “Goodwill and Other Intangible Assets”
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12 Other Related Handbook Sections Section 3465: “Income Taxes” Section 3475: “Discontinued Operations” Section 3865: “Hedges” Accounting Guideline 15: “Consolidation of
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This note was uploaded on 05/08/2010 for the course ACCOUNTING 343 taught by Professor Andrewatt during the Spring '10 term at Webster.

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Chapter 2 KB - Chapter 2 Investments in Equity Securities...

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