RSM321H1 Chapter Notes - Chapter 2: Equity Method, Fair Value, Basis Of Accounting
Document Summary
Equity investments are investments in shares of another company. There are two main categories of equity investments: strategic and nonstrategic. For strategic investments, the investor intends to establish or maintain a long-term operating relationship with the entity in which the investment is made and has some level of influence over the strategic decisions of the investee company. The level of influence varies between full control, joint control, or significant influence. For nonstrategic investments, the investor is hoping for a reasonable rate of return without having the ability to play an active role in the strategic decisions of the investee company. As of january 1, 2016, there are five different types of share investments classified as either a strategic investment, or a nonstrategic investment. The following chart displays the reporting methods for investments in equity securities. Strategic investments: significant influence, control, joint control. Nonstrategic investments: fair value through profit or loss (fvtpl, other elect fair value through oci (fvtoci)
