70 chapter 2 investments in equity securities how to

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70 CHAPTER 2 INVESTMENTS IN EQUITY SECURITIES how to determine whether the unrealized gains are to be reported in net income or other comprehensive income and what is the main rationale for the difference in reporting; and which investments, if any, will still be reported using the cost method, using the equity method, or on a consolidated basis. Required: Prepare the slides for the presentation. Limit your presentation to six slides. Ignore the section on Hedging. Your presentation should cover the reporting of (1) FVTPL, (2) fair-value-through-OCI, (3) cost method, (4) held-for-significant-influence, and (5) held-for-control investments. ( CGA-Canada adapted ) Problem 7 All facts are the same as in Problem 6 except that COX applies GAAP for private enterprises in its general-purpose financial statements. Follow the same instructions as those given in the Required section of Problem 6. WEB - BASED PROBLEMS Problem 1 Access the most recent consolidated financial statements of Vodafone, a British company. (Go to the investor relations section at ) Answer the questions below. For each question, indicate where in the financial statements you found the answer and/or provide a brief explanation. (a) What percentage of total assets at the end of the year is represented by invest- ments in associates? (b) What was the rate of return for the most recent year from the investments in associates? (c) Assume that each year the associates have generated a return similar to the return in part (b) and have paid dividends equal to 75 percent of the income earned. If the company had used the cost method rather than the equity meth- od since the date of acquisition of the investments, how would this change affect the following ratios for this year’s financial statements: (i) Current ratio. (ii) Debt-to-equity ratio. (iii)Return on equity. (d) How much income was earned from available-for-sale investments? (e) What percentage of shareholders’ equity is represented by unrealized gains from available-for-sale investments? (f) What accounts on the balance sheet would change and would they increase or decrease if the available-for-sale investments had always been classified as FVTPL investments? Problem 2 Access the most recent consolidated financial statements for Siemens, a German company. (Go to the investor relations section at .) Answer the same questions as in Problem 1. For each question, indicate where in the financial statements you found the answer and/or provide a brief explanation. (Some ques- tions may not be applicable.)
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  • Fall '12
  • Smith
  • Balance Sheet, Comprehensive income, Generally Accepted Accounting Principles, hiL01537_ch02_039-070.indd Page

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