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International Financial Statement Analysis Workbook, 2nd Edition by Michael A. Broihahn CFA, Anthony T. Cope CFA, Wendy L. Pirie CFA, Elaine Henry CFA, Thomas R. Robinson CFA

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CHAPTER 14

INTERCORPORATE INVESTMENTS

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for (1) investments in financial assets, (2) investments in associates, (3) joint ventures, (4) business combinations, and (5) special purpose and variable interest entities.
  • Distinguish between IFRS and U.S. GAAP in the classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities.
  • Analyze effects on financial statements and ratios of different methods used to account for intercorporate investments.

SUMMARY OVERVIEW

  • Investments in financial assets are those in which the investor has no significant influence. They can be designated as held-to-maturity investments, held for trading securities, or available-for-sale securities. IFRS and U.S. GAAP treat investments in financial assets in a similar manner.
    • Held-to-maturity investments are carried at cost.
    • Held for trading securities are carried at fair value; unrealized gains and losses are reported on the profit or loss (income) statement.
    • Available-for-sale securities are carried at fair value; unrealized gains and losses are reported in other comprehensive income in the equity section of the balance sheet.
    • Gains or losses on investments designated as fair value ...

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