ACTG 3110 Lecture Notes - Equity Method

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30 Sep 2011
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Financial Instruments Review
Part I+V (IAS 39) Part II Part I (IFRS 9)
Control
[Strategic]
Consolidate Consolidate or equity
method or the shares
were public (fair value)
private (cost)
– Consolidate
Joint control
[Strategic]
Proportionate consolidation
(Part V)
Equity method (Part I)
[might as well pick equity since
will switch to equity in the
future anyway]
Proportionate
consolidation
Equity method
Public shares fair
value
Private shares cost
Proportionate consolidation
vs. equity
Significant
influence
[Strategic]
Equity method Equity method
Public shares fair
value
Private shares cost
Equity method
Derivatives
[Non-strategic]
– FVTPL/held-for-trading
FV every B/S date
changes go in net income
Fair value changes
go into net income &
expense transaction
costs
Fair value through profit
and loss changes go
into net income & expense
transaction costs
Bonds
[Non-strategic]
Held-to-maturity (must be
careful about intent to hold
to maturity in Part V)
FVTPL (Held for trading)
Available for sale
Fair value
Amortized cost
Amortized cost
– FVTPL
Don’t have to worry about
tainting provision, don’t
have to worry about intent
to hold to maturity
Shares – public
company
[Non-strategic]
– FVTPL
Available for sale
Unrealized changes hit
OCI, realized changes
hit net income and
then go to R/E
FV changes will hit
net income
– FVTPL
Available for sale (no
recycling)
Transfer from AcOCI to R/E,
no impact on I/S
Shares – private
company
FVTPL or AFS
In Part V, if no active market
FV or cost
Transaction costs are
FVTPL or AFS (no
recycling)
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