Financial Accounting Course Notes

CONSOLIDATION 0-20% a)HELD TO MATURITY: only used for debt securities LOCOM (if impaired, write down) Financial Investment (A+) 22 Cash (A-) 22 b)TRADING: gains & losses are recognized in I/S; intention of investor is to profit from ST price fluctuations FAIR VALUE Financial Investment (A+) 22 Cash (A-) 22 Financial Investment (A+) 4 Gain on investment on securities (OE+) 4 c)AVAIL FOR SALE: recorded on B/S at FAIR VALUE; gains & losses are NOT recognized in I/S but in a separate EQUITY account called Accumulated Other Comprehensive Income (AOCI); AxS Investment (A+) 22 Cash (A-) 22 AxS Investment (A+) 10 Reserve - AOCI (OE+) 6 Deferred taxed payable (L+) 4 If sold: Cash 35 AOCI 6 Deferred taxes payable 4 AxS Investment (A-) 32 Gain on Investment 13 20-50%- Usually EQUITY METHOD (exercise significant influence) Exceptions: *when you are holding the shares for a short period of time => COST METHOD * when investee faces restrictions on its ability to pay dividends to its shareholders TO FIND DIVIDEND PAYOUT TO PARENT/MI/ASSOC. INVESTMENT IN ASSOC = BB+NET P+NEW INVEST-DIV = EB PARENT COMPANY =BB + NET PROFIT – DIVIDENDS = EB Held-to-Maturity: B/S @ FV Held-for-Trading: B/S @ FV, I/S gains/losses Available-for-Sale: B/S @ FV; gains/losses in OE on B/S Gain/Loss = Mkt Value (or Face Value) – Purchase Price ∆ OE = diff btw mkt value & purchase price P&L Impact = realized Gain/Loss + Investment Income from Dividend EI
PROFIT (S)
PROFIT (S) P
S
DIVIDEND P DIVIDEND S EQUITY INCOME=SHR IN PROFIT OF ASSOC COMP OR % OF PROFIT OF P IN (S)
PROFIT ATTR. TO GROUP = EI – % SHR DEP (P) +SHR OF P IN MI
PROFIT ATTR. TO MI = % PROFIT SHR OF (S) - % SHR OF DEP (S)
DIV PAID TO GROUP OWNER = DIV (P) + % SHR OF P IN DIV (S)
DIV PAID TO MI = % SHARE OF MI IN DIV OF S / IF 100% ALL