孩只k学 博学而笃志切向而近思 Chapter 2 Stock Investments -Investor Accounting and Reporting
Chapter 2: Stock Investments – Investor Accounting and Reporting
Stock Investments: Obiectives 1. Apply the fair value/cost and equity methods of accounting for stock investments 2. Apply the equity method to purchase price allocations 3. Learn how to test goodwill for impairment. 2-2
2-2 Stock Investments: Objectives 1. Apply the fair value/cost and equity methods of accounting for stock investments. 2. Apply the equity method to purchase price allocations. 3. Learn how to test goodwill for impairment
Stock Investments-Investor Accounting and reporting 1. Levels of influence or control 2-3
2-3 1: Levels of Influence or Control Stock Investments – Investor Accounting and Reporting
Accounting for the Investment Degree of influence Accounting Lack of significant Financial assets Influence cost method Significant influence Equity method associates(联营) joint control &joints ventures (合营) FASB: Equity method| Subsidiary(子公 IASB: Cost method or司) Control Equity method (after January 2016) CASC: Cost method
2-4 Accounting for the Investment Degree of influence Accounting Lack of significant influence Financial assets / cost method Significant influence / joint control Equity method Associates(联营) &Joints ventures （合营） Control FASB: Equity Method IASB: Cost method or Equity Method (after 1 January 2016) CASC: Cost method Subsidiary（子公 司）
Significant Influence o 20% to 50% voting stock ownership is a presumption of significant influence Use the equity method Don,'t use equity method if there is a lack of significant influence Opposition by investee 2. Surrender of significant shareholder rights 3. Concentration of majority ownership, 4. Lack of information for equity method and 5. Failure to obtain board representation
2-5 Significant Influence 20% to 50% voting stock ownership is a presumption of significant influence. Use the equity method. Don't use equity method if there is a lack of significant influence 1. Opposition by investee, 2. Surrender of significant shareholder rights, 3. Concentration of majority ownership, 4. Lack of information for equity method, and 5. Failure to obtain board representation