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chapter2_toc_caa - Detailed Contents Of Chapter 2...

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Detailed Contents Of Chapter 2 Investments In Equity Securities INTRODUCTION . . . . . . . . . . . . . . . . . 19 Objectives. . . . . . . . . . . . . . 19 Classification . . . . . . . . . . . . 20 Accounting Methods . . . . . . . . . 20 Organization . . . . . . . . . . . . 20 THE CONCEPTUAL BASIS FOR CLASSIFICATION 21 HELD-FOR-TRADING INVESTMENTS . . . . . . . 22 Definition . . . . . . . . . . . . . . 22 Handbook Location . . . . . . . . . . . . . 22 General Definition . . . . . . . . . . . . . 22 Application To Equity Investments . . . . . 22 Required Accounting Procedures . . . . 23 Initial Recognition . . . . . . . . . . . . . . 23 Subsequent Measurement . . . . . . . . . . 23 Fair Value Method With Changes In Net Income . . . . . . . . . . . . 23 AVAILABLE-FOR-SALE INVESTMENTS . . . . . . . 24 Definition . . . . . . . . . . . . . . 24 General Definition . . . . . . . . . . . . . 24 Application To Investments In Equity Securities . . . . . . . . . . . . . . 24 Required Accounting Procedures . . . . 25 Initial Recognition . . . . . . . . . . . . . . 25 Subsequent Measurement . . . . . . . . . . 25 Fair Value Method With Changes In Comprehensive Income . . . . . . . . 25 Cost Method. . . . . . . . . . . . . 27 Applicability . . . . . . . . . . . . . . . . . 27 General Procedures . . . . . . . . . . . . . 27 Return Of Capital . . . . . . . . . . . . . . 27 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . 29 Definition . . . . . . . . . . . . . . 29 The Concept Of Control . . . . . . . . 29 Handbook Definition . . . . . . . . . . . . 29 Varying Interpretations . . . . . . . . . . . 29 Practical Interpretation . . . . . . . . . . . 30 Indirect Ownership . . . . . . . . . . . . . 31 Disclosure . . . . . . . . . . . . . . . . . . 32 Required Accounting Procedures For Subsidiaries . . . . . . . . . . . . . 32 Consolidation Described . . . . . . . . 33 Variable Interest Entities . . . . . . . . 33 The Problem . . . . . . . . . . . . . . . . 33 The Solution - Accounting Guideline No. 15 34 SIGNIFICANTLY INFLUENCED COMPANIES . . . 34 Definition . . . . . . . . . . . . . . 34 Required Accounting Procedures . . . . 35 General Rules . . . . . . . . . . . . . . . . 35 Equity Method . . . . . . . . . . . . 36 Defined . . . . . . . . . . . . . . . . . . . 36 Example - Basic Procedures . . . . . . . . . 37 Intra Statement Disclosure . . . . . . . . . 38 Example - Intra Statement Disclosure . . . . 39 EIC Abstract No. 8 - Losses Exceed Equity Investment Balance . . . . . . . . . . . . . 40 Loss Of Significant Influence . . . . . . . . 41 Different Fiscal Periods . . . . . . . . . . . 42 Consolidation Adjustments . . . . . . . . . 42 Disclosure For Significantly Influenced Companies. . . . . . . . . . . . . . 43 JOINT VENTURES . . . . . . . . . . . . . . . . . 44 Definition . . . . . . . . . . . . . . 44 Required Accounting Procedures . . . . 44 Proportionate Consolidation Described . . 44 ACCOUNTING METHODS SUMMARIZED . . . . 45 IMPAIRMENT . . . . . . . . . . . . . . . . . . . 45 Significantly Influenced Companies . . . 45 General Rules . . . . . . . . . . . . . . . . 45 Subsequent Recoveries . . . . . . . . . . . 46 Other Classifications Of Investments . . . 46 GAINS AND LOSSES ON THE SALE OF EQUITY INVESTMENTS . . . . . . . . 47 (continued)
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DIFFERENTIAL REPORTING FOR INVESTMENTS IN EQUITY SECURITIES. . 47 Qualifying Enterprises . . . . . . . . . 47 Held-For-Trading And Available-For-Sale Investments . . . . . . . . . . . . . 47 Subsidiaries . . . . . . . . . . . . . 48 General Recommendation . . . . . . . . . 48 Other Requirements . . . . . . . . . . . . 48 Significantly Influenced Companies . . . 48 General Recommendation . . . . . . . . . 48 Other Requirements . . . . . . . . . . . . 48 Joint Ventures . . . . . . . . . . . . 50 General Recommendation . . . . . . . . . 50 Other Requirements . . . . . . . . . . . . 50 INTERNATIONAL CONVERGENCE . . . . . . . . 50 Held-For-Trading And Available-For-Sale Investments . . . . . . . . . . . . . 50 Standards . . . . . . . . . . . . . . . . . . 50 Differences . . . . . . . . . . . . . . . . . 50 Subsidiaries . . . . . . . . . . . . . 51 Standards . . . . . . . . . . . . . . . . . . 51 Differences . . . . . . . . . . . . . . . . . 51 Significantly Influenced Companies . . . 52 Standards . . . . . . . . . . . . . . . . . . 52 Differences . . . . . . . . . . . . . . . . . 52 Joint Ventures . . . . . . . . . . . . 52 Standards . . . . . . . . . . . . . . . . . . 52 Differences . . . . . . . . . . . . . . . . . 52 INVESTMENTS IN CANADIAN PRACTICE . . . . . 53 Statistics From Financial Reporting In Canada. . . . . . . . . . . . . . . 53 Example From Practice. . . . . . . . . 53 ADDITIONAL READINGS . . . . . . . . . . . . . 55
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Investments In Equity Securities Introduction Objectives 2-1. This Chapter has three objectives. Stated briefly, these are:
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