Investment in Financial Asset

Reporting for investment in financial assets

1)FVPL 2)FVOCI 3)Amortized Cost

Reporting for investment in associate & joint venture

Equity method

Reporting for business combination

acquisition (full consolidation)

FVPL: 1)balance sheet at? 2) interest, dividend, realized and unrealized gain and lost 3) coupon

1)balance sheet at fair value 2) incomes statement for all 3) statment of cash flow

FVOCI 1)balance sheet 2)interest, dividend and realized gain & lost 3) unrealized gain and lost

1) fair value 2) income statement 3) OCI

Where is OCI located

a line item in equity section of balance sheet

FVPL & FVOCI what is the impact on statements

Same balance sheet value, different net income

Balance sheet value of instrument at FVOCI,FVPL and Amortized cost

Market value for FVPL,FVOCI; Historic cost for amortized cost instrument (do not deduct for amortization)

Amortized Cost, historic cost is higher than par value, how does it effect interest income

1)the difference between historic cost and par value must be amortized 2) if historic cost is higher than par value, interest income will be lower to make up for it 3) if purchased at par, amortized value = part value

Amortized cost 1) Balance sheet 2) interest , realized gain and lost 3) unrealized gain and lost

1) historic cost 2) income statment 3) not recigonized unless imparied (impairment loss go to IS, BS reduced to fair value

equity instrument held for trading is measured at

must be measured at FVPL

If a bond was recorded at amortized cost, but then changed to FVPL, what happens to its reported tax

1) when recorded at amortized cost , unrealized G&L is not recognized unless impaired 2) when recorded at FVPL, unrealized G&L is recorded in IS 3) if there is unrealized loss, tax would be lower

is net income effected by consolidation or acquisition method

no, net income is independent of the accounting method used for the investment in oxbow

merger, A +B =

A

Acquisition A+B

A+B

Consolidation A +B

Z

Define non controlling interest (also called minority interest )

In a business combination, the portion that is not owned by the parent. When less than 100% stake in the target

How to calculate carrying value

Purchase cost + % (net income - dividend) - amortization* (see next card)

amortization is calculated as

%(fair value - book value) / # years

FVPL, how do you calculate income

1) realized gain 2) unrealized gain purchase price VS year end market price 3) plus dividen because i hold shares and receive dividend